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Research by Country/Region January 19, 2018  
JAPAN: CUSTOMS, TAXES and DOCUMENTATION REQUIREMENTS for IT PRODUCTS and SERVICES IMPORTS

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A. Is this country a member of the Information Technology Agreement?

B. Customs documentation requirements for IT products

C. Software: duties and taxes, updates, licenses, electronically delivered

D. IT services: tax treatment and other regulations

E. Refurbished, used, or repaired computer equipment imports


A. IS THIS COUNTRY A MEMBER OF THE INFORMATION TECHNOLOGY AGREEMENT?
YES
Signatories to the Information Technology Agreement (ITA) have eliminated their import duties on a wide range of information technology products, including software and computer hardware. For more information on the ITA, and exact tariff elimination schedules of signatories, click here.
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B. CUSTOMS DOCUMENTATION REQUIREMENTS FOR IT PRODUCTS

What are the documentation requirements for the physical import of software? For other information technology products?
Article 68 of the customs law stipulates that an invoice shall be submitted to customs at the time of making an import declaration. When it is difficult to determine the customs value of the imported goods from the invoice, other documents are required to determine the customs value, such as freight documentation or insurance policies. This applies to both software and other IT products.
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C. SOFTWARE: DUTIES and TAXES, UPDATES, LICENSES, ELECTRONICALLY DELIVERED

DUTIES AND TAXES ON SOFTWARE IMPORTS

Are duties assessed on the intellectual property of the software or on the medium on which is it presented?
Customs duty is assessed on the medium. However, Customs duty on the medium of computer software is zero.

Are taxes assessed on the intellectual property of the software or on the medium on which is it presented?
Consumption tax (i.e. Japan's local sales tax) is assessed on the Customs value of the medium.

Is customized software treated differently than packaged software?
Customized software is treated the same as packaged software.
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IMPORTS OF SOFTWARE UPDATES

What are the customs duties and tax implications for software sold with updates when the full sales price, including cost of updates, is shown on the original commercial invoice? Are duties and taxes paid on that amount? What happens when the updates are sent at a later date? Are duties/taxes applied again? If so, based on what value? How should information presented on the commercial invoice for the original and subsequent shipments to avoid paying duties/taxes more than once on a single sale?
Same as above answer. The payment of duties and taxes cannot be "avoided," but pursuant to the answers above, in practice this means that no Customs duty is assessed, and consumption tax (i.e. Japan's local sales tax) is assessed on the Customs value of the medium. However, the cost of updates is not included in the taxable price.
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SOFTWARE LICENSES: CUSTOMS CLASSIFICATION, IMPORT DUTIES, TAXES, OTHER

Are software licenses classified in Harmonized System 4907?
If software "licenses" in this question mean printed matter, they are classified in HS 4911 (no Customs duty). If "licenses" mean intangible property, they do not fall under any categories in the HS because the HS only classifies physical materials.

Are import duties/taxes applied? If so, on what cost/price base are they levied?
If licenses are classified in HS 4911, no duties are applied (see answer above). If licenses are intangible properties, i.e., the software licenses are presented on some sort of medium, customs duty and taxes are levied as mentioned in answer to "duties and taxes on software imports" above.

Are withholding or other additional taxes applied on software licenses? If yes, how?
The payment for software license agreements (e.g royalty of copyright) is taxed as domestic source income under Japanese tax law. The withholding rate is 20 percent. If the royalty is paid to U.S. residents, a reduced tax rate (10 percent) will be applied under the U.S./Japan Tax Treaty.

If a U.S. license agreement is included in the packaging or is part of the installation/registration of shrink-wrapped software imported from the United States, would that agreement be binding on consumers in your market? If so, would U.S. or local laws pertain?
"If the user knows the contents of the license agreement before breaking the seal of the media (such as the film wrap or seal) and breaks the seal with intent to conclude a license agreement, the license agreement is formed (paragraph 2, article 526 of the civil code). Therefore, he cannot return the product on the grounds that hHe does not consent to the agreement. It is considered, therefore, that in cases where the film wrap, seal, etc., is broken, the store need not accept the return of the product so long as the store checks the adequacy of the information on the film wrap, seal, etc. and confirms that the information is usually recognizable." (Source: Interpretative guidelines on electronic commerce by Ministry of Economy, Trade and Industry)

This guideline is written for domestic e-commerce transactions. As a result, disputes between Japan and a third country would be treated on a case-by-case basis, which means the Japanese civil law would not apply to all disputes between
two countries assuming a condition of sales agreement would be different in each transaction.
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SOFTWARE DELIVERED OVER THE INTERNET/ELECTRONICALLY DELIVERED SOFTWARE

Are taxes applied to software delivered to the end-user over the Internet? If so, on what value?
If the transaction is cross-border, no tax is applied to the software. If the transaction is domestic, 5 percent consumption tax (i.e. Japan's local sales tax) is applied to the price of the software.

Would the situation be different if this software were instead delivered to a distributor who has a license to produce (replicate) and sell the software?
The situation is the same for internet delivery to domestic distributors who have a license to produce and sell the software in Japan.

What are the documentation requirements for the electronically delivered import of digitized products (i.e. software, movie downloads) over the Internet or other networks?
No documentation is required because no tax is applied to software delivered via the Internet.

Must an electronically delivered software import be accompanied by a physical shipment of the same product?
No laws and regulations exist in Japan regarding the subject question.
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D. IT SERVICES: TAX TREATMENT AND OTHER REGULATIONS

Are services (i.e. training, set-up, etc) relating to the sale of software taxed? If so, at what rate and based on what value?
Consumption tax (i.e. Japan's local sales tax) is levied on the services in question whether or not the services are provided by a U.S. business or a domestic business. Japanese consumption tax of 5 percent is levied on the whole amount of the fee for the services.

Are U.S. IT solution providers permitted to send personnel into the country to set up hardware/software-related systems?
Yes.

Are special visa, work permits, and/or professional certification by an accredited body required?
Japan has concluded general visa exemption arrangements with the United States of America, by which American nationals holding valid passports can apply for landing permission for short-term stays (90 days or less) without acquiring a visa for business trips such as market surveys, business liaison, business talks, signing contracts, and after-sales service for machinery imported into japan. However this category excludes profit-making operations and paid activities. For more details, please see http://www.mofa.go.jp/j_info/visit/visa/index.html.
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E. REFURBISHED, USED, OR REPAIRED COMPUTER EQUIPMENT IMPORTS

1. REFURBISHED COMPUTER EQUIPMENT
Is the import of refurbished computer hardware, parts, and accessories (including toner cartridges) permitted?
Import of refurbished goods is permitted unless the said goods are under import restrictions in laws and regulations other than customs-related laws.

If so, what are the documentation requirements?
The same as any imported products (see top of page).

Is special labeling required?
No special labeling is required.

What value should be shown on the invoice?
The price of the goods should be shown on the invoice. Other price factors such as the original catalogue price and the condition of the goods can also be used to determine the customs value.

How are duties and taxes assessed?
Customs duties: in the case of dutiable goods such as cables, according to the customs valuation agreement, the customs value is determined by the transaction price paid by the buyer to the seller, with fares such as transportation-related expenses. If there is no import transaction, the value is determined by factors such as the transaction value of identical or similar goods.

The tax base for consumption tax levied on imported goods is customs value plus customs duty and selective consumption taxes such as liquor tax and tobacco tax.
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2. USED COMPUTER EQUIPMENT
Is the import of used computer hardware, parts, and accessories (including toner cartridges) permitted?
Import of used computer-related goods is permitted unless the said goods are restricted under laws and regulations other than customs-related laws.

If so, what are the documentation requirements?
The same as any imported products (see top of page).

Is special labeling required?
No special labeling is required.

What value should be shown on the invoice?
The price of the goods should be shown on the invoice. Other price factors such as the original catalogue price and the condition of the goods can also be used to determine the customs value.

How are duties and taxes assessed?
Customs duties: in the case of dutiable goods such as cables, according to the customs valuation agreement, the customs value is determined by the transaction price paid by the buyer to the seller, with fares such as transportation-related expenses. If there is no import transaction, the value is determined by factors such as the transaction value of identical or similar goods.

The tax base for consumption tax levied on imported goods is customs value plus customs duty and selective consumption taxes such as liquor tax and tobacco tax.
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3. REPAIRED COMPUTER EQUIPMENT
Are duties and taxes assessed on the re-import of repaired computer equipment?
In principle, duties and taxes are assessed on the equipment in question. However, customs duty and consumption tax are reduced through specific procedures with regard to taxable goods, which are exported from Japan for processing or repair abroad and which will be imported back into Japan within one year.

How should the commercial invoice appear?
State the value of the item and also value/cost for repair/further processing.
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RESPONSE INFORMATION

This response was prepared by the U.S. Department of Commerce/Commercial Service in Tokyo, Japan in February 2003. For further clarification please contact:
Rika Namiki
Commercial Specialist
U.S. Embassy, Tokyo
rika.namiki@mail.doc.gov

Special Notes: The above information is intended to serve only as unofficial guidance. In seeking to obtain government rulings in specific cases, it will often be necessary to refer to special laws, separate regulations and announcements, and case-by-case decisions by the government. Beyond the general guidelines shown above, legal counsel should be retained at an early stage of consummation of a major procurement contract, and before entering into any legal commitments.

Sources: All answers provided have been verified by the following Japanese Government Ministries: Ministry of Finance (MOF), Ministry of Foreign Affairs (MOFA), Ministry of Economy, Trade and Industry (METI),and Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT).

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