National Tax Tribunal’s decision on taxpayer’s eligibility for export exemption

In principle, goods sold from Japan to a non-resident corporation/individual are exempt from Japanese consumption tax (JCT) under an “export exemption”, and in such cases, the seller does not need to collect JCT from the non-resident buyer.

The National Tax Tribunal (NTT) held that a Japanese seller (Taxpayer) who acted as exporter of record was eligible for claiming the export exemption under the following facts:

• A domestic export broker (the Broker) received a purchase order for goods from a Chinese company, and the Broker placed an order with the Taxpayer in accordance therewith;
• Upon the Broker’s request, the Taxpayer arranged for the shipment of the goods to the Chinese company, including the export clearance as exporter of record;
• After the export, the Taxpayer invoiced the Broker for the goods, and the Broker invoiced the Chinese company in accordance with the invoice received from the Taxpayer;
• The Broker received money from the Chinese company and then paid the money to the Taxpayer based on the Taxpayer’s invoice.

The tax authority had argued that, based on the above facts, the Taxpayer was merely instructed to handle the export work by the Broker, who was the substantive exporter of the goods; therefore, the Taxpayer was not entitled to claim the export exemption. The NTT rejected this argument.

Key takeaway

The concept of “exporter” who can claim the export exemption is not clear under the current JCT law. Under the limited facts of this case, the NTT held that the seller (not the export broker) who is named as the exporter of record can claim the export exemption. However, the scope of this NTT’s decision is unclear, and it is necessary to continue to pay close attention to judgments on similar cases in the future.

Reference: National Tax Tribunal