Apple and Google will now be responsible to collect and pay sales tax on behalf of foreign App Store developers who generate revenue from selling apps and in-app purchases in Japan, according to a new report from Nikkei Asia.
The change is designed to make it easier for the Japanese government to collect taxes from developers who reside abroad and have no business presence in the country. The development was announced by Japan’s Ministry of Finance as a way to bridge the gap between taxes collected from local and foreign developers.
Before this change, it was the responsibility of the app developers themselves to report and pay their taxes directly to the Japanese government, which has proved difficult for developers with no physical business presence in the country. Now, Apple and Google will be responsible for reporting and collecting those taxes from their respective App Store and Play Store developers, before paying the appropriate amount of taxes to authorities in Japan.
As per a white paper released by the communications ministry, Japan’s mobile app market is projected to hit $29.2 billion this year, indicating a growth of approximately 50% since 2018. Projections suggest a further increase to $30.6 billion by the year 2025.
Japan states that this change will apply to “operators of platforms that meet a certain threshold of Japanese sales by foreign businesses,” the report adds. This is sure to include Apple and Google once a full list of companies affected by this change is released. Those companies will be mandated to cover taxes for the content sold by foreign entities in their app stores. The ministry anticipates that these taxes will likely be deducted from the revenue collected from users before giving developers their revenue share.
The implementation of this tax change won’t take effect till 2025 at the earliest, the report adds. This is meant to give companies ample time to “learn about the new arrangement and update their systems.” More concrete details about the new system including a sales threshold and the exact timing at which the change will take place will be further revealed in December.
Apple could also be the subject of further regulations in Japan. The government has indicated it’s working on a new law that could force Apple to allow sideloading and external payment systems on its software platforms just like the European Union’s Digital Markets Act.
