The Japanese cabinet has approved the outline of the 2024 tax reform package, which includes significant adjustments to the small business VAT exemption. Foreign businesses will no longer be eligible for the exemption if their payroll threshold is below JPY 10 million or if they have capital of JPY 10 million or more when commencing business in Japan. The reform also expands rules to address potential misuse of the exemption, particularly in the establishment of new subsidiaries. These changes apply even if the affiliated entity of the new subsidiary has a domestic turnover below JPY 500 million, provided its worldwide turnover exceeds JPY 5 billion.
Source Taxbackinternational
