Get Ready for a Revenue Drop Thanks to Japan’s Consumption Tax Soon
This is a single insight from This Week in Apps - Japan Gets Serious. Check out the full article for more insights.
Next month, Apple and Google will begin collecting Japan's Consumption Tax from developer proceeds. You may not think this is a big deal, but for thousands of developers this means revenue will drop by 10% starting April 1st - and that's not a joke.
Now that I have your attention, let's talk about Japan's new-old tax on in-app purchases.
Back in 2015, Japan changed the Japanese Consumption Tax (JCT) to include digital downloads and in-app purchases. The tax was to be collected from all revenue generated in Japan, whether by a Japanese company or not.
If you're a developer and think, "have I ever paid taxes in Japan?" the answer is probably no. See, while the tax was mandatory, enforcing it for non-Japanese companies and individuals selling apps was nearly impossible, losing Japan hundreds of millions of dollars every year.
That's changing next month. If you're making money with your app or game in Japan, pay close attention.
Starting April 1st, Japan shifted the burden of collecting JCT to the App Store and Google Play directly, and both will automatically deduct the tax, 10% of all proceeds, and pass it directly to the government. So your revenue will dip 10% next month.
I was curious to see how much money we're looking at here so I used Explorer to sum up revenue from Japan and then filtered out apps and games made by non-Japanese developers. It's quite a bit more than I expected.
According to Appfigures estimates, Japanese consumers spent $1.2BM in February in the App Store and Google Play. Roughly half of that, $652M, was on apps published by non-Japanese companies. 10% of that means the Japanese government would have kept $65M of that as tax. It didn't because the new ruling goes into effect in April, but as revenue continues to grow this total will likely add up to more than a billion dollars in the next 12 months!
Games will take the biggest hit. According to our App Intelligence, the majority of revenue from Japan comes from games, who stand to lose around $42M per month. Entertainment, Books, Photo & Video, and Music round out the top five, but all of those are in the low single digits.
Should you increase your price? I expect many developers will increase the price of their apps in Japan by 10% to prevent revenue drop, but that may hurt more than it could help.
Not all categories can sustain big price increases, so doing so blindly could lose you more money than it'll save. It's early enough that you have time to compare your revenue to the competition and the market.
Want me to do a live stream to talk about pricing? Let me know.
App Intelligence for Everyone!
The insights in this report come right out of our App Intelligence platform, which offers access to download and revenue estimates, installed SDKs, and more! Learn more about the tools or schedule a demo with our team to get started.
Are you a Journalist? You can get access to our app and market intelligence for free through the Appfigures for Journalists program. Contact us for more details.
All figures included in this report are estimated. Unless specified otherwise, estimated revenue is always net, meaning it's the amount the developer earned after Apple and Google took their fee.
