From Tuesday midnight, October 1, Japan’s consumption tax rate will be raised from 8% to 10%. At the same time, a reduced tax rate will be applied to specific consumer products, generally in the categories of food and drink.
The result is a new consumption tax regime composed of different tax rates even on products on the same shelves in supermarkets and convenience stores.
Which products are taxed at 8% and which at 10%? Let’s check out some specific examples.
A reduced tax rate (8%) will be applied to food except dining-out services. What is considered “dining out” for purposes of the 10% standard tax rate?
The Japanese government defines “dining out” as eating or drinking at restaurants and cafes, of course. But "dining out" also includes other establishments that have tables, chairs, a bar, or similar facilities for the use of its customers who eat food purchased there.
The reduced 8% tax applies if you buy a boxed lunch or bento in the supermarket or other shop and take it away to eat somewhere else. However, it is considered “dining out,” and the regular 10% tax rate applies, if you buy the same boxed lunch and eat it at a counter in the supermarket or the shop where you bought it.
Other “dining out” examples where the 10% tax applies are ramen or soba noodle stands, even if they don't have any chairs, and shopping centers where customers bring their meals to tables after paying bills.
Big convenience store companies already have policies in place to tell their staff how to apply the 10% tax on boxed meals when customers use their eat-in space.
How about the tax situation of using karaoke boxes, which provide snacks and alcoholic drinks?
Though the karaoke box is a place to sing songs, it is equipped with food and drink menus, and so it falls into the category of a dining-out service. The higher 10% tax therefore applies. As a matter of comparison, restaurants in sightseeing train-cars are similarly regarded as eating-out establishments.
How are sushi chain restaurants or pizza delivery shops treated?
Packed take-away meals that shop staff provide for the “to go” market at sushi chain restaurants, as well as pizza boxes packed for take-away or delivery, are eligible for the 8% reduced tax rate.
Are there other places where the reduced tax rate applies if you buy food and drink?
Movie theaters and similar venues come to mind. When a consumer buys drinks and popcorn at stands inside movie theaters, this food service is eligible for the reduced tax rate. The reason is because there are no specific facilities provided for eating and drinking.
Train and air travel are examples too. If a passenger buys foods or snacks from a cabin attendant using a wagon and consumes it at her or his seat on the train or plane, the reduced 8% tax is applied.
How about alcohol drinks?
Beverages with over 1% alcohol content, such as beer and wine, shochu, and other distilled spirits which are listed on the Liquor Tax Law, are ineligible for the reduced tax rate. They will be taxed at the standard 10% tax.
Drinks like non-alcohol beer and other alcoholic drink flavors without the alcohol are sold in Japan. What tax applies to these drinks?
Non-alcoholic beer and wine, and other flavored drinks that taste like alcoholic beverages but without alcohol, are eligible for the 8% reduced tax rate.
What other drinks get the reduced 8% tax?
Bottled mineral water and ice cream floats in a whisky glass without alcohol are taxed at 8%.
Frozen carbon dioxide — dry ice — used as a quick cooling agent is not considered to be a food or beverage and therefore will be taxed at 10% tax.
Are there any examples other than food and drink where the 10% tax might apply sometimes and the 8% tax at other times?
Yes, there are other examples. One is newspapers with at least a twice-weekly circulation.
If readers subscribe for home delivery, the reduced tax rate of 8% applies. If readers buy the same newspaper at a station kiosk or convenience store, or if the reader contracts for a digital newspapers subscription, the standard 10% tax rate applies.
What about taxes on hotel rooms, Airbnb, or other overnight accommodations?
Food and beverages ordered in a hotel, including room service and use of restaurants by hotel guests, will be subject to the new 10% consumption tax rate.
Rooms for overnight stay are not considered “consumption,” and therefore not subject to the tax hike. However, rooms of any type for overnight stay that cost ¥7,000 JPY or more a night are subject to a separate accommodation tax. The rate varies from one city to another.
Many visitors to Japan use public transportation to move around. What about the taxes on transportation tickets?
The consumption tax rate for transportation will be 10%, beginning the first train on October 1. This will apply to all tickets purchased from October 1. However, tickets bought before the October 1 tax hike will still be honored.
Author: Mizuki Okada
