The 2026 tax reform proposals released by Japan’s ruling parties on 19 December 2025 includes changes to the consumption tax (JCT, Japan’s VAT/GST), corporate income tax, international tax and personal income tax. The key JCT proposals—which will affect nonresident sellers into Japan— are summarised below.
Under current rules, JCT on cross-border e-commerce transactions is generally imposed on the importer. However, imported goods with a taxable value of JPY 10,000 or less are, in principle, exempt from JCT. As a result, Japanese consumers may purchase such goods free of import duty and JCT, whereas the same goods purchased domestically would be subject to JCT. This creates a disparity between cross-border and domestic transactions and results in JCT “leakage.”
Under the FY 2026 tax reform, the transfer of assets shipped to Japan from abroad through mail-order sales where the consideration per asset does not exceed JPY 10,000 (excluding JCT) (a “Transfer of Specified Low-Value Assets”) will be treated as a taxable transfer of assets and subject to JCT.
For taxable goods imported in connection with a Transfer of Specified Low-Value Assets by a business operator registered as a Specified Low-Value Asset Seller, measures will be introduced to exempt such goods from JCT at importation when withdrawn from a bonded area. This exemption will apply only where the following information is included in the import declaration or relevant documents:
These rules are planned to take effect on 1 April 2028.
As noted in a previous issue of Indirect Tax News, platform taxation for the provision of electronic services was introduced on 1 April 2025. The FY 2026 tax reform will extend this framework to the sale of goods beginning on 1 April 2028.
Under the current e-commerce rules, a nonresident business selling goods through a domestic warehouse used as a platform operator’s logistics hub is generally required to account for and pay JCT. In practice, however, many such transactions go unreported. The tax reform seeks to address this tax leakage and reduce the compliance burden associated with the taxation of Transfers of Specified Low-Value Assets.
The following transactions, where consideration is received through a platform, will be treated as subject to platform taxation, with JCT liability shifting to the platform operator when the aggregate amount of such transactions exceeds JPY 5 billion:
A Type II Platform Operator may, with the prior consent of the relevant nonresident business, treat as its own the taxable purchases made in Japan by the nonresident business and the withdrawal of taxable goods from a bonded area by such nonresident business to the extent the purchases and withdrawals relate solely to the transfers of assets described in item 1) above. In such cases, the platform operator may claim the input tax credit and details of the credit must be included in the statement to be attached to the JCT return.
In connection with this reform, platform operators previously referred to as Specified Platform Operators with respect to the provision of electronic services will be redesignated as Type I Platform Operators.
Under the Qualified Invoice Retention System (i.e., the Japanese invoice system), taxable purchases made from persons other than Qualified Invoice Issuers (“Tax-Exempt Businesses, etc.”) are generally not eligible for input tax credits, as purchasers cannot obtain the invoices or other documents required to substantiate such credits. Transitional measures, however, allow a specified percentage of the amount equivalent to the input JCT to be deemed as the creditable input tax for the taxable purchases from Tax-Exempt Businesses, etc. during designated periods following the introduction of the system.
These creditable percentages will be revised under the FY 2026 tax reform. As a result, taxable businesses will be able to claim input tax credits on purchases made from Tax-Exempt Businesses, etc. to a greater extent and for a longer period than under the original schedule.
However, where the aggregate amount of taxable purchases made from a single person other than a Qualified Invoice Issuer exceeds JPY 100 million (currently JPY 1 billion) in a given year or fiscal year, the transitional measure will not apply to the portion of purchases exceeding the threshold. This amendment may be viewed as unfavourable to JCT taxable businesses. These revisions will apply to taxable periods beginning on or after 1 October2026.
Kenichiro Kishi
BDO in Japan
Changes to the Rules on Low-Value Imported Goods
Under current rules, JCT on cross-border e-commerce transactions is generally imposed on the importer. However, imported goods with a taxable value of JPY 10,000 or less are, in principle, exempt from JCT. As a result, Japanese consumers may purchase such goods free of import duty and JCT, whereas the same goods purchased domestically would be subject to JCT. This creates a disparity between cross-border and domestic transactions and results in JCT “leakage.”Under the FY 2026 tax reform, the transfer of assets shipped to Japan from abroad through mail-order sales where the consideration per asset does not exceed JPY 10,000 (excluding JCT) (a “Transfer of Specified Low-Value Assets”) will be treated as a taxable transfer of assets and subject to JCT.
For taxable goods imported in connection with a Transfer of Specified Low-Value Assets by a business operator registered as a Specified Low-Value Asset Seller, measures will be introduced to exempt such goods from JCT at importation when withdrawn from a bonded area. This exemption will apply only where the following information is included in the import declaration or relevant documents:
- The registration number of the Specified Low-Value Asset Seller that conducted the transfer; and
- A statement indicating that the taxable goods relate to a Transfer of Specified Low-Value Assets.
These rules are planned to take effect on 1 April 2028.
Platform Taxation on the Sale of Goods
As noted in a previous issue of Indirect Tax News, platform taxation for the provision of electronic services was introduced on 1 April 2025. The FY 2026 tax reform will extend this framework to the sale of goods beginning on 1 April 2028.Under the current e-commerce rules, a nonresident business selling goods through a domestic warehouse used as a platform operator’s logistics hub is generally required to account for and pay JCT. In practice, however, many such transactions go unreported. The tax reform seeks to address this tax leakage and reduce the compliance burden associated with the taxation of Transfers of Specified Low-Value Assets.
The following transactions, where consideration is received through a platform, will be treated as subject to platform taxation, with JCT liability shifting to the platform operator when the aggregate amount of such transactions exceeds JPY 5 billion:
- Transfers of assets in Japan by nonresident businesses (including incidental transfers but excluding Transfers of Specified Low-Value Assets); and
- Transfers of Specified Low-Value Assets by business operators.
A Type II Platform Operator may, with the prior consent of the relevant nonresident business, treat as its own the taxable purchases made in Japan by the nonresident business and the withdrawal of taxable goods from a bonded area by such nonresident business to the extent the purchases and withdrawals relate solely to the transfers of assets described in item 1) above. In such cases, the platform operator may claim the input tax credit and details of the credit must be included in the statement to be attached to the JCT return.
In connection with this reform, platform operators previously referred to as Specified Platform Operators with respect to the provision of electronic services will be redesignated as Type I Platform Operators.
Revision of the Transitional Measures under the Qualified Invoice Retention System
Under the Qualified Invoice Retention System (i.e., the Japanese invoice system), taxable purchases made from persons other than Qualified Invoice Issuers (“Tax-Exempt Businesses, etc.”) are generally not eligible for input tax credits, as purchasers cannot obtain the invoices or other documents required to substantiate such credits. Transitional measures, however, allow a specified percentage of the amount equivalent to the input JCT to be deemed as the creditable input tax for the taxable purchases from Tax-Exempt Businesses, etc. during designated periods following the introduction of the system.| Current transitional measures | |
| Period | Creditable Percentage |
| From 1 Oct 2023 to 30 Sept 2026 | 80% of the amount equivalent to input JCT |
| From 1 Oct 2026 to 30 Sept 2029 | 50% of the amount equivalent to input JCT |
| On or after 1 Oct 2029 | 0% |
These creditable percentages will be revised under the FY 2026 tax reform. As a result, taxable businesses will be able to claim input tax credits on purchases made from Tax-Exempt Businesses, etc. to a greater extent and for a longer period than under the original schedule.
| Period | Creditable Percentage |
| From 1 Oct 2026 to 30 Sept 2028 | 70% of the amount equivalent to input JCT |
| From 1 Oct 2028 to 30 Sept 2030 | 50% of the amount equivalent to input JCT |
| From 1 Oct 2030 to 30 Sept 2031 | 30% of the amount equivalent to input JCT |
| On or after 1 Oct 2031 | 0% |
However, where the aggregate amount of taxable purchases made from a single person other than a Qualified Invoice Issuer exceeds JPY 100 million (currently JPY 1 billion) in a given year or fiscal year, the transitional measure will not apply to the portion of purchases exceeding the threshold. This amendment may be viewed as unfavourable to JCT taxable businesses. These revisions will apply to taxable periods beginning on or after 1 October2026.
Kenichiro Kishi
BDO in Japan