Introduction.
Cross-border e-commerce (E-commerce) has been expanding worldwide with Amazon, eBay, Rakuten, Shopify, WooCommerce, and Corona Vortex, and is now the focus of attention by all companies. Cross-border e-commerce has been introduced with the positive aspects of being able to start selling within minutes of creating a site, and new sales opportunities from markets around the world. On the other hand, local taxes and various other costs are not shared much: local taxes such as VAT are levied and collected by the seller on the local buyer, but even in the case of cross-border e-commerce, there are cases of taxation, collection, and reporting.
Not all tax accountants, lawyers, and other domestic professionals have knowledge of overseas tax and legal affairs.
IN THIS COLUMN, OPTI CORPORATION, WHICH HAS EXTENSIVE EXPERIENCE IN THE TAX ASPECTS OF CROSS-BORDER EC, PROVIDES A "CROSS-BORDER EC TAX NAVIGATOR" IN A Q&A FORMAT. WE HOPE THAT THIS CROSS-BORDER EC TAX NAVIGATOR WILL BE OF HELP TO VARIOUS COMPANIES CONSIDERING CROSS-BORDER EC.
Q] DO I NEED TO FILE A TAX RETURN JUST TO SELL DIGITAL SERVICES?
A] THIS IS REQUIRED DEPENDING ON THE COUNTRY. FOR EXAMPLE, TAX DECLARATIONS ARE REQUIRED IN THE U.S., THE EU, AND THE U.K.
AS OF APRIL 2020, THE CORONAVIRUS IS TERRORIZING THE WORLD. AS A RESULT, MOVEMENT RESTRICTIONS AND CITY LOCKDOWNS (LOCKDOWNS) ARE IN PLACE IN CITIES AROUND THE WORLD AS WELL AS IN JAPAN. UNDER THESE CIRCUMSTANCES, COUNTRIES HAVE SEEN AN INCREASE IN SALES OF DIGITAL SERVICES AND ONLINE E-COMMERCE SALES.
According to ChannelLife, citing and explaining an IDC report from a leading research firm, the impact of COVID-19 on each industry in the ICT sector in Q1 2020 had a negative impact on most industries. Similarly, on a full year 2020 basis, the impact has been significant.
Negatively impacted industries were smartphones, PCs, tablets, retail, and transportation, while positively impacted industries were healthcare, cloud, and UC&C (Unified Communications: message apps like Line).
Source: https://channellife.co.nz/story/idc-coronavirus-presents-opportunities-for-ict-vendors
It is predicted that online conferencing systems such as Zoom will continue to become more popular due to "new lifestyles" in the future.
Similarly, the market and digitization of electronic service offerings, such as fan sites and digital goods sales, are expected to expand further in the future.
Businesses are going digital, or digitally transforming, which means more sales opportunities for companies. On the flip side, it also means increased competition, price competition, and international tax filing costs.
WHETHER A COMPANY IS FROM JAPAN OR ANY OTHER COUNTRY, WHEN SELLING DIGITAL SERVICES TO CONSUMERS IN THE U.S., THE EU, OR ELSEWHERE, IT IS OBLIGED TO PAY NOT ONLY VAT, A LOCAL INDIRECT TAX, BUT ALSO OTHER TAXES SUCH AS THE NEWLY CREATED DIGITAL TAX IN EACH COUNTRY.
These digital services are diverse. Specific services are listed below.
-Cloud services
-Software provision and modification
-Software upgrades
-Platform services
-Auction sites
-Fan sites
-Online wisdom services
-Content services such as travel information
-Electronic management services associated with certain devices as IoT
-Digital content distribution, etc.
If you offer any of the above services, you will need to research tax registration and tax filing obligations in the relevant countries before starting these businesses. If it is later found to be necessary, especially if you are a publicly listed company, you will be held accountable and the foreign tax authorities will take strict measures, including additional taxation. Companies that provide services globally cannot afford to say that they were unaware of this.
Our company, Opti Corporation, provides tax advice and tax filing support related to digital transformation (digitalization of companies).
The field of digital taxation changes frequently on a monthly basis, and the countries covered are all countries in the world.
It is extremely difficult to constantly monitor the taxation of these countries.
We research digital taxation around the world and provide information to our clients.
We hope you will consider our digital transformation tax services.