Understanding the money side of China import business — from side hustle to corporation
In any import-and-resell business, tax procedures become more important as profits grow. Leaving them aside "because it's a side job" or "I started small" can lead to additional assessments and late payment penalties. This guide explains the income tax filing, consumption tax, and the Invoice system for China sourcing businesses.
This article explains general tax knowledge. Always consult a certified tax accountant (zeirishi) or your tax office for your specific situation. Tax laws change frequently — check the latest information from the National Tax Agency.
Profits from China sourcing are generally treated as business income (or miscellaneous income) and must be reported through an annual income tax return.
| Case | Tax return | Notes |
|---|---|---|
| Import business as your main occupation | Required | File as business income |
| Side business while employed (annual income over ¥200,000) | Required | Combined with employment income |
| Side business (annual income under ¥200,000) | Not required | Resident tax filing may still be needed |
| Revenue but operating at a loss | Recommended | Losses can be carried forward |
"Income" means revenue minus necessary expenses. Product costs, shipping, inspection fees, communication costs, and a portion of rent can all be expensed.
Common deductible expenses in a China import business:
Most importantly, keep every receipt, invoice and bank transfer record. Chinese platforms rarely issue Japanese-language receipts, so organize payment records and customs documents carefully.
Your obligation to charge consumption tax generally starts when taxable sales in the base period (2 years earlier) exceed ¥10 million.
| Status | Condition | What to do |
|---|---|---|
| Exempt business | Base-period taxable sales ≤ ¥10 million | No consumption tax filing or payment |
| Taxable business | Base-period taxable sales > ¥10 million | File and pay consumption tax |
| Simplified taxation | Taxable business that applied | Calculated with deemed purchase ratios (simpler procedure) |
Newly established sole proprietors can also use the "20% special measure" to reduce their burden. When sales grow, consult a tax accountant.
The Qualified Invoice (Invoice) system started on October 1, 2023. To claim input tax credits, taxable businesses must retain qualified invoices.
Key points for China sourcing businesses:
Direct purchases from small Chinese suppliers often fail the invoice requirements. Through a Japanese import agent, you receive Japanese-language invoices and qualified invoices, making bookkeeping smooth.
At customs clearance, imported goods incur customs duty and consumption tax. Rates depend on the HS code of the product.
Duty rates depend on the HS code and country of origin (e.g., EPA agreements). Estimate them before purchasing to set your retail prices correctly.
Sole proprietors should use the Blue Return (青色申告) system, which offers a special deduction of up to ¥650,000.
Side income is generally reportable. Tax authorities are strengthening income detection — the question is not "will I be caught" but filing correctly.
Fine for exempt businesses today, but if you become a taxable business, prepare your document management. Going through a Japanese agent gives you qualified invoices for peace of mind.
Most general goods need no license, but food, cosmetics, pharmaceuticals, and electrical products have separate regulations (PSE, Giteki, Food Sanitation Law, etc.). Check your category before sourcing.
Tax management for China sourcing should be prepared from day one, not after sales take off. Record expenses, keep documents that satisfy invoice requirements, and understand your consumption tax status — doing this from the start avoids major corrections later.
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