Japan subsidiary can be kind of just agency for USA or Foreign parent company and in this case Reverse Charge method is also applicable. It means that Japan subsidiary does not need to charge consumption tax to the client because the client will have to pay the consumption tax to tax office.
1. If the USA parent company issue invoice and just be paid to Japan subsidiary and additionally there is just bookkeeping as AP against USA parent company for this payment on Japan’s subsidiary side, the client will have to pay the consumption tax to tax office in consumption tax return on behalf USA parent company (vendor). Therefore, there is no any action needed for consumption tax with this transaction on USA parent company also need to mention consumption tax in invoice as well.
2. If Japan subsidiary issue invoice and be paid to Japan subsidiary and additionally there is ISA between USA parent company and Japan subsidiary for this service, also both party (USA parent company and the company’s local client in Japan) can recognize it to B2B business for cross-border supplies of electronic commerce by foreign business, Japan subsidiary can be kind of just agency for USA parent company and Reverse Charge method is also applicable for this case. It means that Japan subsidiary does not need to charge consumption tax to the client because the client will have to pay the consumption tax to tax office with consumption tax return within 2 months after year end on behalf of Japan subsidiary.
Full gross value for total revenue can be admitted for bookkeeping in JGAAP for even agency usually in Japan unlikely IFRS and USGAAP. For example, the sales record for Trading Company and Advertisement Agency are different according to JGAAP or IFRS & USGAAP, so when we convert from JGAAP to USGAAP, the revenue is decreased for those business in order to change from gross revenue to net revenue. Investor and creditor in Japan has to take a responsibility to recognize the business model including that such a revenue for entity value.
