How will it change with sales of 10 million yen? We have summarized the points of consumption tax that you should be aware of!
The line with sales of 10 million yen is the timing to revise the business plan
For business owners, increasing income is a sign that the business is on track, but when the scale of the business grows, it is important to pay attention to whether or not it is subject to consumption tax. The criteria for paying consumption tax vary depending on sales and business content.The taxable sales line is 10 million yen is.
When this sales are exceeded, it is important to review the cash flow. This time, I will explain the concept of consumption tax that should be considered when sales exceed 10 million yen.
* In the "Foundation Notebook" that writes this article, even more information is explained in the thick "Foundation Notebook / Printed Edition". You can get it for free, so please order it.
Contents of this article
Consumption tax mechanism that sole proprietors want to know
For business owners, sales tax payments are an important factor to know. Here, I will explain what the consumption tax is and how it works.
Consumption tax is one of the indirect taxes, in which the consumer bears the tax on all consumption, and the business operator deposits it and then pays the tax. Businesses are in a position to calculate and pay sales tax on behalf of consumers. When a business purchases from a wholesale company, the wholesale company pays the consumption tax, and the wholesale company pays the consumption tax to the manufacturer.
In other words, each company becomes a consumer and deposits consumption tax.
With the above scheme, each business operator will be responsible for the consumption tax. However, there may be situations where consumption tax payments are duplicated between businesses. To prevent such duplication, consumption tax is calculated in the following way.
The calculation method of consumption tax is basically Taxable sales are calculated from the sales of each business, and the consumption tax paid to the business partner at the time of purchasing is deducted from it (taxation method in principle).
-Specific calculation method When a retail company purchases from a wholesale company, it is assumed that 100,000 yen and 10,000 yen, which is 10% of the consumption tax, are paid, 150,000 yen is sold, and the consumption tax is 15,000 yen. At this time, the consumption tax payable by the retail company is 5,000 yen, which is obtained by subtracting the consumption tax of 10,000 yen paid at the time of purchase from the consumption tax of 15,000 yen on sales. A wholesale company that has received a consumption tax of 10,000 yen from a retail company purchases a product from the manufacturer for 80,000 yen and a consumption tax of 8,000 yen, and the consumption tax to be paid is 10,000-8,000 yen, which is 2,000 yen.
Duty-free businesses that do not have to pay consumption tax can incorporate the consumption tax into their sales even if they receive it from consumers.
There is a question that it is okay for tax exemption companies to collect consumption tax from consumers, but in this case it is said that it is okay to collect it. This is because there is no agreement in the tax law to prohibit tax exemption businesses from collecting consumption tax.
In addition, there is a statement that companies that purchase from tax exemption companies purchase at a price including tax (taxable purchase). In this case, if the purchasing company refuses to pay sales tax, it may violate the law, so be careful.
The obligation to pay consumption tax for sole proprietors depends on sales
Businesses are divided into tax exempt businesses that are exempt from paying consumption tax, as well as taxable businesses that have to pay consumption tax. So where is the line between the two?
The taxable lines mentioned above areWhether taxable sales exceed 10 million yen in the base period and specific period is. In this case, the taxable sales amount is the amount excluding tax before recording expenses and various deductions. Businesses that exceed the standard must file a tax return, report the amount of consumption tax to the tax office, and pay the consumption tax.
And if the taxable sales are less than 10 million yen during the relevant period, it is a tax exemption business that is exempt from paying consumption tax.
The calculation method of consumption tax is basically as described above, but the sales subject to taxation are those two periods before (base period).
Conversely, if you meet the sales line that is taxable this year, you will be required to pay consumption tax in the second fiscal year. Regarding sales, even if the taxable business's sales line is met this year, sales may decline from the next year onward, so a financial plan must be firmly established.
The specific period applies to sole proprietors or companies that open from January 1st to June 30th and enter the second year. If the taxable sales exceed 10 million yen between January 1st and June 30th of the previous year, you will be taxable.
If the opening time is between July 1st and December 31st, the specific period will not be applied.
If you do not reach the taxable sales in a specific period within one year from the opening of the business due to the setting of the taxable period related to consumption tax, you are a tax exempt business. For business owners who have been in business for less than one year, it may be difficult to cross this taxable sales line during a specific period, so it may be considered that the first year is tax exempt unless it is a special case.
If the income of the business owner and the salaryman are also 10 million yen, we will consider which is more advantageous due to the taxation of consumption tax. If you are considering whether to become independent from a salaryman, it is worth knowing as knowledge.
If you are a business owner with an income of 10 million yen, the following are the taxes and deductions that you can generate.
If you calculate all of these, the estimated take-home is about 6.5 million yen.
On the other hand, if the salaryman's income is 10 million yen, the taxes and deductions are as follows.
If you do these calculations, the estimated take-home is about 7.2 million yen. Even if your income is the same, there will be a difference in your take-home pay due to differences in taxes and deductions. Of these, consumption tax does not have to be paid by salaried workers, and the tax burden is different.
Sometimes it's better to be a taxable business
At first glance, it seems that the consumption tax burden will increase when you become a taxable business operator, but in reality, there are cases where it is more advantageous to become a taxable business operator.You can get a refund of the excess when you pay a lot of consumption tax Because. As for the calculation of consumption tax amount, if you are a business operator that adopts the taxation method in principle, you will be eligible for a refund.
When calculating the consumption tax refund, it may be easier to raise funds, so when changing from a tax exemption business to a taxable business, you should consider the total cash flow.
Consumption tax is applied only in Japan, and if you are engaged in export business and sell products overseas, you will not be exempt from tax, so you will not receive consumption tax from overseas business partners.
On the other hand, when purchasing products for export in Japan, we pay consumption tax. From this point, while the consumption tax deposited on sales is almost nonexistent, the consumption tax paid is almost returned according to the taxation method in principle because the consumption tax is paid for the purchase.
As mentioned above, it is the same as the case where the consumption tax is not incurred on the sales of the product, but even if the sales are small compared to the purchase, there is a high possibility that the consumption tax will be refunded a lot. This is because the more purchases you make, the more consumption tax you pay, and the less sales you make, the less consumption tax you pay.
For example, if the consumption tax paid by purchasing is larger than the consumption tax amount deposited by sales, the excess amount will be refunded.
Some sole proprietors are considering incorporation when taxable sales exceed 10 million yen. What is needed at that time is the timing of incorporation. If sales decrease two years after the business is started and the consumption tax is paid, the consumption tax burden will increase.
If your business is on track and sales are expected to continue to grow in the next two years, the higher your sales, the more sales tax you will have to pay. Therefore, if you continue to be in good condition without considering the consumption tax burden while you are a tax exemption business, you may be able to afford cash flow.
In principle, the consumption tax is calculated according to the taxation method, but if the business scale is small, such as a sole proprietor, the consumption tax calculation may become complicated. In such cases, you can use a simple taxation method that makes it easier to calculate sales tax.
The simple taxation method is a method of multiplying the consumption tax entrusted at the time of sales by the approximate consumption tax paid for purchase (deemed purchase rate) and deducting the calculated amount from the entrusted consumption tax. The deemed purchase rate varies depending on the type of industry, so it may be a good idea to check if you are considering applying it.
Some conditions are required to receive the simplified taxation system.
By the way, the consumption tax refund explained above cannot be received by businesses that apply the simplified taxation method. This is because the "deemed purchase rate" used in the simplified taxation method is only an approximation, and an accurate refund amount cannot be calculated.
For example, even if you spend an amount on capital investment, you may not be able to receive a consumption tax refund, which may affect your cash flow. You should be careful when choosing between the simplified taxation method and the principle taxation method.
If sales in the base period exceed 50 million yen, the taxation method will be automatically switched to in principle two years later. However, if sales fall below 50 million yen during the base period of the next fiscal year, the simplified taxation method can be applied again if the "Simple taxation system selection non-application notification form" has not been submitted to the tax office.
However, regardless of the simple taxation method or the principle taxation method, if you apply as a taxable business operator, you will not be able to return to the tax exemption business operator for the next two years. Including this point, it is also necessary to carefully consider whether or not to apply as a taxable business operator.
Even if you apply as a taxable business operator, if you are unable to pay the tax due to reasons such as cash flow, there are some penalties under the tax law.
・ If the late tax is not paid by the fixed deadline, the smaller of the fixed annual interest rate or the special standard rate (the rate used to calculate the late tax) will be added to the original tax.
This annual interest / special standard ratio will change depending on whether the payment is within 2 months or over, so if you cannot pay, please check with the National Tax Agency or the Tax Office.
・ Undeclared additional tax This is a penalty imposed when the final tax return is overdue. In this case, the tax is added by multiplying the tax amount by a multiplication rate of 15% for up to 500,000 yen and 20% for over 500,000 yen. However, if you file your tax return within one month from the filing deadline, or if you are willing to pay the tax for some reason, you may be exempt from the additional tax.
Things to remember when becoming a taxable business
When you become a taxable business, you are required to perform various procedures correctly. Here are some points to keep in mind when becoming a taxable business operator.
For example, when you become a taxable business or apply for a consumption tax calculation method, you need the following documents.
・ Consumption tax taxable business operator notification form Submitted when taxable sales exceed 10 million yen and become a taxable business operator.
・ Consumption tax simplified taxation system selection notification form When selecting the simplified taxation method as the consumption tax calculation method, submit this document to apply.
・ It is necessary to return to the tax exemption business after the taxable sales in the standard period of the notification form to the effect that you are no longer the taxpayer of consumption tax is less than 10 million yen. However, as mentioned above, once you become a tax-exempt business, you cannot basically return to a tax-exempt business for two years.
As a taxable business operator, you must keep documents that clearly show the amount of taxable sales and consumption tax on purchases. Therefore, it is necessary to properly keep documents such as books that journalize the consumption tax amount and invoices that show the flow of sales and purchases.
The retention period for these documents is 7 years.
For sole proprietors, if the consumption tax payment amount in the previous year is 480,000 yen or more, the number of payments must be divided into several times in the next year.
To do so, submit an "interim tax return" and be subject to the interim tax return. The number of payments is set from 2 to 12 times (including final tax returns) depending on the amount paid. If the amount of consumption tax to be paid increases, check carefully.
summary
Regarding the payment of consumption tax, the key is basically whether or not the taxable sales will be 10 million yen. However, since tax is levied on sales in the base period or special period that goes back two years, you must be careful about cash flow and payment timing.
In addition, there are detailed regulations such as how to calculate the consumption tax, so if you are going from a tax exemption business to a taxable business, make a firm business plan.
The founding notebook booklet version explains in detail how to calculate and pay the consumption tax. If you are a taxable business, please refer to it.
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