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Thread: Consumption & Recycle Tax and Other Charges.

  1. #1

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    Default Consumption & Recycle Tax and Other Charges.

    I am interested to know if members are being charged Consumption Tax & Recycle Fee (Tax) on their auction purchases along with other charges.

    I hear lots of different stories and there have been some brief discussions about this in the past but I am not sure if members are fully aware of the following.

    Consumption Tax.
    Whenever an agent buys a vehicle from the auction the auction will charge the agent 5% consumption tax.

    For example, let's say the last bid or winning bid is 500,000yen, the consumption tax on top of the car cost will be 25,000yen. If the car cost is 1,500,000 yen the consumption tax will be 75,000yen so therefore the higher the car sells for the higher the consumption tax will be.

    When an agent exports the vehicle they will then claim back the consumption tax in their next tax cycle which will be either 1/4 or yearly depending on the business.

    So, if your agent is charging you consumption tax, bare in mind they are claiming it back and I am sure they are refunding you the amount or not charging you this tax in the first place.....

    The consumption tax is going to increase soon so the above is something important to know.

    Recycle Fee (Tax).
    There is a government tax called Recycle Fee which is charged each time a vehicle changes hands. The recycle fee will vary from as low as 5,000yen to 25,000yen depending on the make and model of vehicle. On the auction sheet, the recycle fee amount is always displayed so that the buyer is aware of the amount due to it varying between the make and models.
    As with the consumption tax, the auction will charge the agent/buyer this tax at the time of buying the vehicle and once again this tax is claimed back by the exporter if the exporter can produce a BOL (legal shipping document) showing that the vehicle has been exported out of the country.

    So if your agent is charging you recycle fee, bare in mind they are claiming it back from the government and as with consumption tax I am sure they are refunding you or not charging you this in the first place......

    Negotiation Charge.
    Some agents charge their customers a negotiation fee because the agent is charged this fee by the auction. The cost of negotiation that the auction charges the agent is minimal and depending on the auction group (USS, CAA, JU, TAA etc) and vehicle category it will vary between 2,000 to 5,000yen. Some agents do not charge this fee where some agents do which is fare enough since it is an extra charge but then some agents really know how to charge in this area as well.

    The reason I mention this charge is because a member of this forum emailed me with a question after I posted a copy of an English version of an USS negotiation application form in this thread - http://forums.jdmvip.com/Pacific_Coa...back-5736-t-18

    Their question was - "Successful Bid Charge: ¥16,000 (yen)" is this the amount it costs to negotiate a vehicle because I was charged my normal agents fee by my agent plus 16,000yen for negotiation. Why does it cost so much to negotiate a vehicle, at first I thought my agent was making up charges. When I questioned my agent, they emailed me a very similar form but in Japanese which I can see the 16,000yen and they told me it is the charge the auction charges if the vehicle is won through negotiation".

    Well, it does not cost 16,000yen "extra" if the vehicle is brought via negation. What the 16,000yen refers to is that if you (the agent) wins the vehicle you (the agent) will be charged 16,000yen "in total". Your agent is not charged the normal auction buyers fee for that auction plus an extra 16,000yen.
    The agents that have a flat fee which is normally around 100,000yen normally already incorporate an auction buying fee, the fee the auction charges the buyer. Depending on the agent, they may of allowed 12,000yen for auction fee so therefore in this case, it would cost them 4,000yen more buying the vehicle via negation, not 16,000yen more.

    Other Fee's such as Shipment Setup or Shipment Arrangement Fee etc.
    Some agents charge these fees on top of their agents fee and this can vary between 5,000 to 25,000yen or more depending on the agent.
    If the agent is advertising an agents fee of 100,000yen (the market average) then why do they then charge a fee to arrange the shipping of the vehicle, I guess they might think you are going to come over to Japan and arrange it yourself. It has always been my understanding that an agent in Japan obtains the vehicle and exports it (arranges the exporting) for their customer…….. pretty standard procedure really.

    So why do some agents have a separate fee for arranging the shipment of your vehicle and the answer is very simple really.

    Until recent times, most agents had an agents fee they charged customers and this fee included everything from buying the vehicle, auction fees through to shipping the vehicle and it use to be around 120,000yen during the nineties and from the late 90's it was reduced to 100,000yen as the average cost. During the last 5-10yrs there has been an increase in the number of new agents in Japan and these new agents brought a new pricing system with them. Instead of having a flat fee they now advertise a lower agents fee but in return make it up and beyond with other added on costs also known as the "hidden costs".

    It is human nature to shop around for the cheapest agents fee and even though my agents fee is clearly displayed on my site I still receive the emails like "how much do you charge to by a vehicle and export it".

    If an agent can advertise or offer a lower agents fee they become more competitive against other agents especially with the inexperienced importers. The more experienced importers know these smoke and mirror tricks so they generally are not fooled.

    So for example, my agents fee is 100,000yen and it includes everything (except extra inland transport as every agent charges extra for this) but I could advertise tomorrow that my agents fee is 80,000yen and then charge you 20,000yen to arrange the exporting of your vehicle. This means I can advertise on my website that my agents fee is only 80,000yen per vehicle when really it is 100,000yen when you include the extra madeup or hidden fees. If I am charging my customers consumption tax or recycle tax and keeping these taxes as well I could in fact advertise my agents fee for a lot less.

    Anyway, I thought I would start a thread about it, partly to make some members aware in case they are not and to help other members when choosing an auction agent and that they double check exactly what you will be changed on top of what the vehicle sells for at auction.

    Finally for the record and since I have taken the time to write this, I do not and never have charged consumption tax or recycle fee, I do not charge an auction negotiation fee at all nor do I charge an shipment setup fee or anything like that.

    Cheers

    Mark.

    Mark Bremner
    Brave Auto International - Japan Based Vehicle Exporter & Auction Agent - 20yrs Sourcing & Exporting Genuine Hi-Grade Vehicles to Customers Worldwide.

    Main Website / Japanese Auction Search Website / Facebook / Youtube

  2. #2

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    Very informative post Mark, thanks for sharing.

    I will be the first one to say that I have been paying Con. Tax. Here is the exact break down of an invoice from 2011, this car also went to negotiation(these are the actual numbers on my invoice);

    Car - 740,000 Con. Tax - 37,000 Total - 777,000

    Inland Transport from Kobe - 16,200 Con Tax - 810 Total - 17,010

    Recycle Tax - 15,950

    Negotiation Fee - 10,000 Con Tax - 500 Total - 10,500

    Service Fee - 80,000 Con Tax - 4000 Total - 84,000

    Invoice Total - 904,460

    Remember this was early 2011. So I paid 42,310yen in Consumption Tax that my exporter was refunded, that's $500 or more.

    I bought another car a month before this at almost the same price, and also went to negotiation, so that means $1000 or more was spent on Consumption Tax. I never really paid much attention to the fees, I just paid my bills without giving it much thought. I was also given free long term(over a year) storage so I looked at it as a cost o doin business. I am not complaining about being charged for it, however it is good to know what exactly I paid for.

    Thanks again Mark for explaining this in depth, it is something I will be taking into serious consideration with my future purchases.
    Last edited by SilverStar; 07-27-2013 at 05:33 AM.

  3. #3

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    Mark as usual showing why he is the best in the business.

    back in 2004 i paid some of these fee's. but at the time the margins on these cars was so good i could care less..

    i was made aware of these fee's in 2008, but i have been using exporters that dont try to take advantage of the un-educated so it hasn't been a concern.

  4. #4

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    Very interesting and informative post.

    SilverStar, just to break it down for the readers here's what I calculate your total service fee to have been (I did not include the inland shipping but did include the tax amount from it): 148260 JPY

  5. #5

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    Quote Originally Posted by jdmvip View Post
    Very interesting and informative post.

    SilverStar, just to break it down for the readers here's what I calculate your total service fee to have been (I did not include the inland shipping but did include the tax amount from it): 148260 JPY
    Lets remember that taxes for things that are not exported, there is no refund. Inland, negotiation charges, or services provided in Japan are taxed and we cannot recover it when the vehicle is exported.

    I think people have to remember that a tax refund is not an easy process. First of all, finding out that tax can be refunded was not something we knew for years before it was explained to us. As I started on my own, with a partner who thought he knew everything when I later learned he knew nothing and asked him to leave, I was left on my own to "learn the business". As Mark as shown us, the consumption tax issue had been a highly guarded secret that was never publicly discussed by exporters. I'm glad its out in the open because it will arm potential buyers with more knowledge.

    In addition, an accountant has to prepare a tax return, which can be done quarterly, bi-annually, or yearly. It has not been mentioned here that not all the consumption tax is refunded. And, no one considers the cost of preparing the accounting in order to make a tax refund. Then the wait happens.

    If an exporter is doing a quarterly statement, and is paying the consumption tax to the auctions, this exporter could wait up to 5 months for some of the money they paid out. That's to say, once the quarter has been completed, and if they submit their accounting to the tax office the day after their quarter has completed, then they could wait about 3-4 more weeks for the refund. Once we started to do the returns, we found it took about a month for one of my staff to do the final accounting to submit to our accountant, and if the accountant wasn't busy, it would take 2 weeks for them to complete the return and file. Then we wait 3-4 weeks. Now with online filing, the process of filing is quicker for our accountant, and shortens the wait time by a week or two.

    Our quarterly tax accountant return is about 200,000 yen in fees. That is not including the labour hours my staff put into preparing the accounting. I have figured it costs about another 250,000 yen to SASTRAD for preparing the accounting. While we would have to do the accounting anyways, however in a different way (I think), I can't consider the whole cost as a means of getting a return.

    For auction-focused sellers like us, we now tie up millions of yen every quarter because we are paying the tax on behalf of the buyer. So, (here is a little rant) what burns me is when someone wants to discount my fee to the point that it actually costs more money up front to provide them a service. In other words, if a car costs 1 million, the tax is 50,000 yen, and with the auction fees and recycle tax, it could be that I am actually paying out more money than I'm taking in from their fee, and will have to wait for the tax return, which could be months before I see the money. This is why I am strongly against dealing with individuals who want to discount my fee if they are buying an expensive car.

    We have come to accept that consumption tax and recycle tax are the short-term costs of doing business, and while we don't get everything back in the end, I hope that now people get a bit more of an understanding of how the exporter has to deal with the taxes; it costs the exporter money to recover their money.

    I spoke with Silver about his taxes, as he bought the cars from us. Should he wish to comment, its up to him. As a good client with good communication between us, the situation has come to a happy resolution.
    Last edited by Sastrad; 07-31-2013 at 03:24 AM.

    Steven Smith
    SASTRAD KK
    http://www.sastrad.com
    http://www.japancarexportsonline.net
    I'm a Canadian in Nagoya

  6. #6

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    Hey Steve

    I posted here before I saw the other thread that talked about charging the recycle tax but I did want to clarify how much the service fees were too.

    I admire how you handled the situation and won't go into the same detail here except to say that what you did was not illegal and was not a crime.....yet some other Exporters when caught red handed in fraud will move the world to try and avoid responsibility and hold their customer(s) in contempt.

    I see what you mean about the overhead and how much this affects even the larger companies. I already have an idea from many Exporters and even some very large ones, just how much float money they need for weekly purchasing and bidding, let alone the cash flow issue the consumption tax creates.

    This is one thing that makes me want to say 'stay away from the small guys', they have the most incentive and need to cheat/defraud buyers to stay afloat already being cash-strapped and vulnerable to delays in cash flow. I want to clarify that "Small Guys in Japan" generally means companies without anything to lose (no land, no auction membership).

    I like how threads like these can be positive and informative when handled by everyone with a cool and calm head, especially for those with a business at stake. I know from experience that it can be difficult to balance especially when you read something and know it's not true or that there's more to the story etc...

    Cheers guys

  7. #7

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    Quote Originally Posted by Sastrad View Post
    Lets remember that taxes for things that are not exported, there is no refund. Inland, negotiation charges, or services provided in Japan are taxed and we cannot recover it when the vehicle is exported.

    I think people have to remember that a tax refund is not an easy process. First of all, finding out that tax can be refunded was not something we knew for years before it was explained to us. As I started on my own, with a partner who thought he knew everything when I later learned he knew nothing and asked him to leave, I was left on my own to "learn the business". As Mark as shown us, the consumption tax issue had been a highly guarded secret that was never publicly discussed by exporters. I'm glad its out in the open because it will arm potential buyers with more knowledge.

    In addition, an accountant has to prepare a tax return, which can be done quarterly, bi-annually, or yearly. It has not been mentioned here that not all the consumption tax is refunded. And, no one considers the cost of preparing the accounting in order to make a tax refund. Then the wait happens.

    If an exporter is doing a quarterly statement, and is paying the consumption tax to the auctions, this exporter could wait up to 5 months for some of the money they paid out. That's to say, once the quarter has been completed, and if they submit their accounting to the tax office the day after their quarter has completed, then they could wait about 3-4 more weeks for the refund. Once we started to do the returns, we found it took about a month for one of my staff to do the final accounting to submit to our accountant, and if the accountant wasn't busy, it would take 2 weeks for them to complete the return and file. Then we wait 3-4 weeks. Now with online filing, the process of filing is quicker for our accountant, and shortens the wait time by a week or two.

    Our quarterly tax accountant return is about 200,000 yen in fees. That is not including the labour hours my staff put into preparing the accounting. I have figured it costs about another 250,000 yen to SASTRAD for preparing the accounting. While we would have to do the accounting anyways, however in a different way (I think), I can't consider the whole cost as a means of getting a return.

    For auction-focused sellers like us, we now tie up millions of yen every quarter because we are paying the tax on behalf of the buyer. So, (here is a little rant) what burns me is when someone wants to discount my fee to the point that it actually costs more money up front to provide them a service. In other words, if a car costs 1 million, the tax is 50,000 yen, and with the auction fees and recycle tax, it could be that I am actually paying out more money than I'm taking in from their fee, and will have to wait for the tax return, which could be months before I see the money. This is why I am strongly against dealing with individuals who want to discount my fee if they are buying an expensive car.

    We have come to accept that consumption tax and recycle tax are the short-term costs of doing business, and while we don't get everything back in the end, I hope that now people get a bit more of an understanding of how the exporter has to deal with the taxes; it costs the exporter money to recover their money.

    I spoke with Silver about his taxes, as he bought the cars from us. Should he wish to comment, its up to him. As a good client with good communication between us, the situation has come to a happy resolution.
    Welcome to the world/business of a car exporter in Japan......lol, not as easy as it may seem as you have worked out going by your above reply.

    My original post (and further ones to come about other things) were not directed at anyone in particular, it was only directed to the agents who do charge the taxes and other etc, if you are one of those agents that do then yes it would of included you but as you mention you have recently changed policy so it does not affect you.

    You might want to post when your policy change happened so you do not encounter other customers of yours asking questions why they were charged.

    I am also glad it has come out, I have been thinking about posting what I did for a long time, I have been holding off because I knew it would rock a few boats in the industry, there will be a few agents out there running for cover at the moment and back peddling like there is no tomorrow making up stories to their customers because I am sure there are a few unhappy importers out there at the moment.

    Accounting fee's and cash out lay etc........ all part of being an agent although your detailed reply about it is good, it will give customers a better understanding of why we do not discount our agents fee's.

    Cheers

    MB..

    Mark Bremner
    Brave Auto International - Japan Based Vehicle Exporter & Auction Agent - 20yrs Sourcing & Exporting Genuine Hi-Grade Vehicles to Customers Worldwide.

    Main Website / Japanese Auction Search Website / Facebook / Youtube

  8. #8

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    Lots of great info here guys.

    The numbers in my previous post were from a car that I purchased through SASTRAD. I did not want to post who the exporter was, I only wanted to show a real world example from someone who has paid the consumption tax and other fees.

    Steve contacted me within minutes of my reply and explained the situation in detail. Over the past few years I have watched SASTRAD expand quite rapidly. Being a small business owner/operator myself I know how hard it is to quickly grow to keep up with your industry, and still fine tune all of the minor details that keep you competitive.

    The way Steve handled this speaks volumes about his honesty and integrity. This awkward situation has been resolved and he will be refunding me, which made me very happy but I was not expecting it.

    Keep up the great work!

  9. #9

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    SAS is top notch, I've never done business with him but I can tell he gives value for money and at the end of the day that's all importers should expect.

    BTW Braves OP... dare I say - sticky material.
    Last edited by Boyblue; 08-11-2013 at 12:32 AM.

  10. #10

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    If anyone believes the excuses for why any agent charges taxes on exported vehicles then I am sure you will believe anything. I am sure some agents are in damage control with well written stories to their customers and would love for this thread to disappear.

    The first thing you learn as a car exporter is how to claim the taxes back as we are talking about a lot of money here and it is common knowledge in this industry (on this side of the fence).

    Cheers

    MB.

    Mark Bremner
    Brave Auto International - Japan Based Vehicle Exporter & Auction Agent - 20yrs Sourcing & Exporting Genuine Hi-Grade Vehicles to Customers Worldwide.

    Main Website / Japanese Auction Search Website / Facebook / Youtube

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