Consumption Tax After the Invoice System: Key Practical Points
Even after the invoice system (the qualified-invoice retention method) started, some points in day-to-day practice remain easy to trip over. We organize the key items for everyday bookkeeping — the transitional-measure deadline, checking registration numbers, and the treatment of small transactions.
- The transitional measure for purchases from tax-exempt businesses, and its deadlines
- Items to check on invoices you receive
- The small-amount special rule and small refund invoices
- What to watch for in relationships with suppliers
01The transitional measure "shrinks in stages"
Under the invoice system, in principle you cannot deduct input consumption tax unless you hold a qualified invoice issued by a registered business. However, for purchases from unregistered parties such as tax-exempt businesses, a transitional measure is provided to soften the shock.
| Period | Deductible portion |
|---|---|
| Oct 2023 – Sep 2026 | 80% of the equivalent input tax |
| Oct 2026 – Sep 2029 | 50% of the equivalent input tax |
| Oct 2029 onward | Not deductible (in principle) |
02Items to check on invoices you receive
To take an input tax deduction, the invoice you receive must meet the qualified-invoice requirements. Check that the following are stated.
- The issuer's name and registration number (13 digits starting with T)
- The transaction date
- The transaction details (and, for reduced-rate items, a note to that effect)
- The consideration divided by tax rate, and the applicable rate
- The consumption tax divided by tax rate
- The name of the business receiving the invoice
03The small-amount special rule and efficiency
Businesses below a certain size can use the "small-amount special rule": for taxable purchases under ¥10,000 (tax included), they may take an input tax deduction by keeping the books alone, without retaining an invoice (mind the applicable period). For businesses with many small expenses, this greatly reduces the workload.
Also, the "qualified refund invoice" issued for returns or discounts is exempt from the issuing obligation if it is under ¥10,000 (tax included). Using these rules correctly keeps bookkeeping effort down.
04What to watch for with suppliers
Unilaterally demanding price cuts from a tax-exempt business, or cutting off dealings, can raise issues under the Antimonopoly Act or the Subcontracting Act. It is important to conduct price negotiations carefully, in a form both sides can accept.
Summary
From October 2026 the transitional deductible portion drops from 80% to 50%. If you deal with tax-exempt businesses, estimate the impact.
Check that invoices you receive meet the stated requirements, including the registration number.
Use rules like the small-amount special to streamline work, while conducting supplier price talks with due regard for the law.
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Sources & References
This article is based on information available at the time of publication. Rules and systems may change. Please consult a professional before making any individual decisions.
