Taxable period and Base period for consumption tax

Principle of taxable period

For the Japanese consumption tax, which is a value-added tax, the taxable period for corporations is, in principle, the fiscal year.

The base period refers to the period on which the determination of tax liability is based, which in the case of a corporation is the two fiscal years prior to the current fiscal year.

More details on consumption tax liability will be explained in another article.

Exceptions to the taxable period

A company can use 3 months or 1 month as its taxable period if it notifies the tax office of the special exception.

It is often used by companies that file consumption tax refunds, such as exporting companies, for cash flow reasons.

Under the Consumption Tax Law, base period is defined on the basis of “fiscal year” rather than “taxable period”.

The reason why the base period is defined based on “fiscal year” instead of “taxable period” is to ensure that the result of determination of tax liability is consistent even when the special exception for shortened taxable period is applied.

Therefore, even if the taxable period is shortened, the determination of tax liability is made based on the “fiscal year,” and the tax liability for the shortened taxable period included in the “fiscal year” is unified.

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