Tax Categories for Individual Calculation of Deductible Purchase Tax
Typically, this is how a Japanese business would classify tax payables:
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Purchase tax only for taxable sales transactions – This refers to tax paid for purchases that will be used for taxable sales transactions. Examples are consumption tax paid for the following:
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Inventory item for sale
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Raw materials or any other materials used for the production of inventory items for sale
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Transportation costs, PR/advertising costs, outsourcing costs incurred in the production of inventory items for sale
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Purchase tax only for non-taxable sales transactions – This refers to tax paid on purchases or expenses that will be used for non-taxable transactions. For example:
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Costs incurred from development of land for sale (Sale of land is non-taxable.)
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Costs incurred from construction of apartments for rent (Rent is non-taxable.)
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Purchase tax for both taxable and non-taxable transactions – This refers to tax paid on purchases or expenses commonly used for both taxable and non-taxable transactions. This tax category is set after purchase. For example:
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Electricity in the office
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Bank charges
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Please see your tax consultant for information and advice.