Changes to Japan tax on Kindle Direct Publishing

In The Global Indie Author I warn authors to pay attention to changes to sales tax in Japan due to 2014 legislation that requires all companies to charge and collect sales tax when selling to Japanese residents. Companies were given time to comply, and as of October 15 time is up.

Amazon have thus announced to their Kindle Direct Publishing authors that list prices for Japan will now include 8% consumption tax. Amazon are following the same plan as they did with the new VAT laws that were executed in January in Europe: your current price will now be tax-inclusive instead of tax-exclusive, and if you change your price for Japan it must now be tax-inclusive.

This means that if you do not raise your price, your royalties will fall as of October 15.

For example, if your current price is ¥800, your royalty is ¥560. After October 15, your royalty will fall to ¥519 because the 8% tax will be deducted from the list price before your royalty is paid (800/1.08 x 70% = 519). If you wish to maintain your current royalty of ¥560, you will need to raise your price to approximately ¥863.

If you set only a USD price and allow Amazon to auto-convert to Japanese yen, the auto-converted price will now be tax-inclusive. This means that if you are earning, say, $3.00 on your ebook in the U.S., you will earn less than $3.00 in its yen equivalent because the 8% will be deducted from your USD-converted price before your royalty is paid. It is never a good idea to auto-convert anyway, mainly because you cannot control the “look” of your price, and in Japan prices that contain or end in 4 or 9 are considered unlucky and can repel buyers.

I expect these changes will cause a great deal of confusion just as the changes to VAT did. At the heart of the confusion was Amazon’s decision to publish the royalty price ranges with and without tax. Please note the tax-exclusive price range is for your information only; it is not the range you need to set your price within.

To receive a 70% royalty you need to set a tax-inclusive price between ¥250 and ¥1250.

The changes will also affect authors who publish with CreateSpace and elect to use their Expanded Distribution. If you are a CreateSpace author, expect to receive a message from them about this soon.

By the way, the legislation passed in 2014 dictated an increase in Japan sales tax from 8% to 10% on October 15, but the increase was put on hold due to global economic conditions. Japan, however, has vowed they will raise the tax to 10% in April 2017.

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