January 14, 2014 2:23 am JST

Japan to tax e-content sales by foreign firms

KOTARO FUKUOKA, Nikkei staff writer

TOKYO -- Japan will start collecting taxes on sales of electronic books, music and other online content downloaded from abroad as early as fiscal 2015.

     Currently, no sales tax is levied on sales of e-books and apps through an overseas server of Amazon.com or other distributors, putting domestic firms at a disadvantage. Japan taxes purchases of physical products from abroad when shipments are cleared by customs. But no duty collection system exists for online e-content purchases.

     Using European Union practices as a reference, the government plans to revise regulations so that foreign companies selling e-content to Japanese consumers will have to register with the local tax authority and pay the levy.

     When a foreign firm sells e-content to corporations, on the other hand, the buyers will be responsible for paying the sales tax. A Japanese firm purchasing foreign business software online, for instance, will pay the same price to the seller but also have to kick in the equivalent of sales tax to the Japanese authority.

     Lawmakers had initially tried to adopt the change by the spring, when the consumption tax rises to 8% from 5%. But needing more time to sort out the details, the goal now is to close the loophole by October 2015, when the sales tax is slated to rise to 10%.

     The government tax panel will begin related discussions as early as next month to incorporate the proposal into the fiscal 2015 tax reform outline.