Consumption Tax Continued..
It is only Possible to Claim if you property is in the Rental pool
Consumption Tax is similar to GST or VAT in other countries. In theory it is meant to be an end Consumer tax. The business operator has an obligation to collect C- tax from customers and Pay to the tax agency.
However it is possible to offset your payable with consumption tax paid in Purchases (purchases need to be attributable to the income)
If your Tax credits exceed your tax debits, It is possible to get a refund. (Yes, in cash)
This can be pretty significant for buyers who purchase a rental property as they can potentially claim back 10% of the building price of sale.
Important points
Businesses are exempt from Registering for consumption until their Top line revenue Reaches 10m yen.
The system is "opt in", not automatic
Deadline are super important in Japan and can be the difference between being able to claim and not being able to claim tax credits
This needs to be done before the end of your first financial year . Note your first financial year in Japan will probably be Partial. Financial year for Individual is deemed to be Calendar
Considerations
It is important to note though, once you register for Consumption tax, you need to stay registered for a minimum of 3 years. This has a couple of implications.
The consumption tax return is separate from income tax return and has extra charges/ Accounting fees
Generally speaking , while owners can expect to get a hefty refund from Year 1, (due to build Costs), Year 2 & 3 would see a Tax obligation. (assuming that your Revenue is higher than Expenses)
If you sell your property while still being registered for Consumption tax.. Similarly to when you purchased .. There is assumed to be consumption tax in the building component of the sale price.. So you would end up paying Consumption tax. The Consumption tax on sale price maybe higher than the consumption tax in Purchase.
If your revenue stays under 10m, then it is usually possible to de-register for consumption tax in year 3 to take affect in Year 4.