Japanese Government Demands 31.4 Billion Won from US Epic Games for "Fortnite" Consumption Tax Omission

Record High Overseas Corporate Consumption Tax
"Japanese Consumers Were Charged, So Taxes Must Be Paid"

The Japanese government has reportedly imposed a retroactive tax of 3.5 billion yen (31.4 billion KRW) on Epic Games, the US developer of the popular online game 'Fortnite.' This marks the largest tax collection to date following the recent announcement to strengthen consumption tax collection on overseas content providers, and it is expected to impact the future entry of game companies into the Japanese market.

Fortnite Japan Official Website.

On the 1st, Nihon Keizai Shimbun (Nikkei) reported that the Tokyo Regional Taxation Bureau stated, "Despite users in Japan making purchases such as item acquisitions, the consumption tax was not properly reported," and imposed this amount on Epic Games, including penalties for underreporting. This is the largest amount collected from a foreign company for consumption tax.

According to Nikkei, Epic Games acknowledged that the items pointed out for tax filing omissions were "consumption tax related to Fortnite sales from 2018 to 2020." Fortnite is a popular online game with 500 million users worldwide. Epic Games stated, "It was simply an oversight," and added, "The unpaid taxes have now been settled."

Epic Games has completed the amended tax filing and paid the amount totaling 3.5 billion yen.

While Fortnite is free to play, it sells paid items within the game. The tax bureau considers that when domestic consumers purchase these paid items, Epic Games must pay the corresponding consumption tax.

Nikkei explained, "The Organisation for Economic Co-operation and Development (OECD) has set guidelines that digital content consumption tax for foreign companies should be levied in the country or region where the consumption occurs." In 2015, Japan introduced a tax system reform requiring overseas businesses to report and pay consumption tax, but it has been challenging to grasp the actual transaction status, limiting its effectiveness.

In response, the Japanese government is recently strengthening consumption tax collection on overseas games. The Ministry of Economy, Trade and Industry plans to include in next year's tax reform requests the imposition of consumption tax payment obligations on platform companies such as Apple and Google.