What is refund of consumption tax in Japan
In the case persons purchases merchandise or service, they need to pay consumption tax.
When they pay purchase price to seller of merchandise or service, they add money for consumption tax. Then, the seller pay the money for tax office.
For example, you operate convenience store and sell ice cream at 324 yen. Among 324 yen, 24 yen is money for consumption tax. (324/108×8. In the case consumption tax rate is 8%).
On the other hand, when you purchased the ice cream from wholesaler, you paid 108 yen to wholesaler. Among 108 yen, 8 yen is money for consumption tax. In this case, journal entry (shiwake) is as below.
Merchandise inventories 100 / cash 100
So, 24-8=16 yen should be paid by you to tax office.
Moreover you have renovated your shop at 5.4 million yen ( amount of consumption tax is 400,000 yen).
repair cost 5 million yen / cash 5 million yen
In this case , 400,000 + 8 – 24 = 399,984 can be returned to you from tax office, roughly speaking.
Requirements to receive refund of consumption tax
In the event you are salaried worker or land lord for residential building, you cannot receive refund of consumption tax.
Because, you are not taxable tax payer for consumption tax. You are just a kind of general consumer. So, you need to satisfy following conditions.
1 You need to become taxable taxpayer for consumption tax
So, if you are operating business before transfer of ownership of real estate and all your sales is taxable sales of consumption tax, 100% of 399,984 can be reimbursed to you.
Tax refund in the case of real estate transaction
In the case you purchase land and a building ( assumed price for land is 10 million yen, price for building is 1.08 million yen ), purchase price for building includes consumption tax ( 80,000 yen = 1.08 million × 8/108 ).
If you can apply for tax refund of consumption tax in this transaction, a part of this 80,000 yen can be returned to you.
If you receive consumption tax of 50,000 yen from your customers ( tenant of your commercial building ), 30,000 yen can be returned to you.
The problem is that if your tenant is renting your apartment for her residence, the rental fee is not object of consumption tax. So, you can not apply for this tax refund.
Rate of Taxable income of consumption tax
Rate of Taxable income of consumption tax = Taxable income of consumption tax / Total income.
Assumed that there are not other income and expense.
In this case Rate of Taxable income of consumption tax is 40/100 = 40%.
How to apply for tax refund of consumption tax
1 You need to submit tax report of selection of taxable taxpayer
Assumed that Rate of Taxable income of consumption tax is 98% at the time you have purchased your real estate.
your company needs to keep rate of taxable income for consumption tax at high percentage.