Consumption Tax Increase in Japan
By Lynda Deaver
On February 27, 2014
You know how most items in the 100 yen shop are actually 105 yen? I was horrified to hear that from April 1, 2014, those 105 yen items will go up to 108 yen when the consumption tax goes from 5% to 8% in Japan.
My poor, stingy heart almost gave out when a coworker told me that the consumption tax in Japan will then go up to 10% October 2015. I managed to convince my heart to keep going — mostly by reminding it that seeing the doctor costs money.
The 100 yen shop example is the most obvious, but what other items and services will be affected by the consumption tax increase? The Japanese National Tax Agency website provides information about what is and isn’t taxed under the consumption tax (called 消費税 – shouhizei).
Items Subject to Consumption Tax
According to the Japanese National Tax Agency website, the following types of transactions fall under the consumption tax:
- The transfer of property, fortune, assets, etc. (or of labor) by a business person as a business to gain profits.
- The import of foreign cargo, assets, etc.
Basically, most goods, services, and utilities, in short, “consumables,” are taxable. Some items are tax exempt, though, so read further to find out what items will not be affected by the consumption tax increase. In reading these lists, keep in mind that these are aren’t exhaustive, definitive lists. If you want more information, you should read the National Tax Agency website or contact the National Tax Agency directly.
Below are some of the items which will be directly affected by the consumption tax increase.
- General goods and merchandise
- Food services (restaurants, etc.)
- Parking space rental
- Office rental
- Travel expenses (in Japan)
- Lodging expenses (in Japan)
- Travel allowance (as provided by employer)
- Electric charges
- Gas charges
- Water charges
- Phone charges
- Bank transfer fees
Items Not Subject to Consumption Tax
Tax-exempt items are items that normally would be taxed under the consumption tax but that are not subject to taxation under consideration of social policies. There are special categories of tax exempt items, but I will only be listing some of the itmes which fall under the Japanese word 非課税 (hikazei, tax-exempt) and apply to in-country transactions.
Untaxed items are items which clearly don’t meet the guidelines for being subject to consumption tax and are therefore not taxed under the consumption tax. In short, both tax-exempt items and untaxed items will not be affected directly price-wise by the consumption tax increase in Japan.
Below, you can read about some items that are tax-exempt or untaxed under consumption tax.
- Life-insurance premiums
- Postage stamps
- – the price of stamps will be going up in April 2014
- – stamps themselves are tax-exempt, but the delivery charge is taxable.
- Revenue stamps
- – the stamps used when paying for visa handling fees, etc.
- Gift cards, prepaid cards
- – when the recipient of the card buys something, consumption tax will be charged on that item
- Credit fees
- Residential-use rentals, like apartments, etc
- – some of my friends have seen their apartment rental prices rise, but this is not a directly because of the consumption tax increase.
- Schooling fees/class fees
- Midwivery services
- Housing loan
- General salary/wages, bonuses
- Social insurance premiums (health insurance, pension, etc.)
- General memberships
For more information about the tax increase check out the following links:
- National Tax Agency Consumption Tax Guide
- JETRO – Overview of Consumption Tax
- Grant Thorton – Japan Tax Bulletin
- Japanese National Tax Agency
- Shohize ga yoku wakaru (Understanding Consumption Tax)
- Information about taxed items
What do you think of the consumption tax increase? Are you pinching pennies or not too worried?