Japanese Consumption Tax and the App Store
David Smith (2012):
The Japanese government requires that Apple withhold 20% of your profits from App Store sales unless you have filed forms demonstrating that you are a foreign company and taxable there instead. The forms are a bit complex and the process a bit cumbersome, but unless you complete it 20% of whatever you make in Japan is taken and not returned.
I have been doing this, and my understanding is that it’s for the tax on software royalties.
Small developers operating outside of Japan can be tough to get ahold of for owed consumption tax payments, so the Finance Ministry is placing the burden on Apple and other app market operators.
[…]
According to a report from Nikkei Asia, Japan’s Finance Ministry is making app store operators like Apple and Google responsible for paying consumption taxes owed by foreign developers. These changes won’t go into effect until 2025 to give companies time to adapt.
[…]
The current consumption tax is 10%, which Apple would pass to its developers. So, for example, on top of Apple’s 15% to 30% revenue share on App Store sales and subscriptions, Apple would add 10% on top to pay for the consumption tax in Japan.
Developers would then need to adjust prices to account for this price increase.
It is now possible for developers to set different prices in different regions, so they could make Japan-specific adjustments if desired. But this still seems like a loss for small developers because—with Japanese revenue under JPY10,000,000 (~$95,000)—they are currently exempt from the Japanese consumption tax, but now they will need to pay it because Apple itself is above the threshold. Or maybe there will be a way to certify to Apple that your combined sales in Japan are under the threshold?
Previously:
- Smaller App Store Pricing Increments
- App Store Prices to Increase in Europe
- App Store Foreign Tax Changes
- More International Taxes on Software Sales
Update (2024-01-03): Jeff Johnson:
I’ve never heard of this before. There doesn’t appear to be anything in App Store Connect.
I’m not sure what happened, but I no longer see the Japanese tax stuff in App Store Connect, either.
