JP Consumption Tax

Skill Metadata

Skill Metadata

Field	Value
Jurisdiction	Japan
Jurisdiction Code	JP
Primary Legislation	Consumption Tax Act (消費税法)
Supporting Legislation	Act on Special Measures Concerning Taxation (租税特別措置法); Qualified Invoice Preservation Method (適格請求書等保存方式)
Tax Authority	National Tax Agency (国税庁 / NTA)
Filing Portal	e-Tax (etax.nta.go.jp)
Contributor	Open Accountants Community
Validated By	Pending -- requires sign-off by a Japanese tax accountant (税理士)
Validation Date	Pending
Skill Version	1.0
Tax Year	2025
Confidence Coverage	Tier 1: rate application, threshold determination, simplified taxation calculation. Tier 2: mixed-supply classification, partial exemption, transitional measures. Tier 3: cross-border digital services, customs duties, group taxation.

Confidence Tier Definitions

• [T1] Tier 1 -- Deterministic. Apply exactly as written. No reviewer judgement required.
• [T2] Tier 2 -- Reviewer Judgement Required. Claude flags and presents options. Qualified professional must confirm.
• [T3] Tier 3 -- Out of Scope / Escalate. Do not guess. Escalate and document.

Step 0: Client Onboarding Questions

Before computing any consumption tax figure, you MUST know:

1. Taxable sales in base period (基準期間) [T1] -- two calendar years prior (for sole proprietors)
2. Taxable sales in specified period (特定期間) [T1] -- January 1 to June 30 of prior year
3. Whether registered as a qualified invoice issuer (適格請求書発行事業者) [T1] -- T-number registration
4. Nature of supplies [T1] -- standard-rated, reduced-rated, exempt, or non-taxable
5. Total taxable purchases (input tax) [T1] -- for general method calculation
6. Whether simplified taxation (簡易課税) has been elected [T1] -- election form submitted
7. Business type under simplified taxation [T1] -- determines deemed purchase ratio

If taxable sales in the base period are <= JPY 10,000,000 AND the client is not a qualified invoice registrant, the client is a tax-exempt business (免税事業者). STOP -- no consumption tax filing required unless voluntarily registered.

Step 1: Rates and Taxable Supplies [T1]

Legislation: Consumption Tax Act, Art. 29

Tax Rates [T1]

Tax Rates (Consumption Tax Act, Art. 29)

Category	National CT Rate	Local CT Rate	Combined Rate
Standard rate	7.8%	2.2%	10%
Reduced rate (軽減税率)	6.24%	1.76%	8%

• Standard rate — 7.8% (10%)
• Reduced rate (軽減税率) — 6.24% (8%)

Reduced Rate Items (8%) [T1]

Reduced Rate Items (8%)

Item	Detail
Food and beverages	Excluding alcohol and dining-in (外食)
Newspapers	Delivered by subscription, published at least twice weekly

Non-Taxable Transactions [T1]

Non-Taxable Transactions

Category	Examples
Exempt (非課税)	Land sales/leases, securities, medical services under insurance, educational tuition, funeral/burial services
Out of scope (不課税)	Gifts, donations, government subsidies, insurance proceeds
Export exempt (免税)	Exports of goods, international transport, services to non-residents consumed outside Japan

Step 2: Filing Threshold Determination [T1]

Legislation: Consumption Tax Act, Art. 9

Filing Threshold Determination (Consumption Tax Act, Art. 9)

Test	Threshold	Period
Base period test (基準期間)	Taxable sales > JPY 10,000,000	2 calendar years prior
Specified period test (特定期間)	Taxable sales > JPY 10,000,000 (AND wages > JPY 10,000,000)	Jan 1 - Jun 30 of prior year
Qualified invoice registration	Voluntarily becomes taxable regardless of sales	From registration date

Base Period for Sole Proprietors [T1]

Base Period for Sole Proprietors

Filing Year	Base Period
2025	Calendar year 2023
2026	Calendar year 2024

• Base/specified period exemption check — If base period taxable sales <= JPY 10,000,000, check specified period. If both are under threshold AND not registered as qualified invoice issuer, the business is tax-exempt. (Consumption Tax Act, Art. 9)

Step 3: Qualified Invoice System (インボイス制度) [T1]

Legislation: Consumption Tax Act, Art. 57-2 to 57-6 (effective October 1, 2023)

Required Elements on a Qualified Invoice [T1]

Required Elements on a Qualified Invoice (Consumption Tax Act, Art. 57-2 to 57-6)

Element	Detail
1. Issuer name and T-number	T + 13-digit number (e.g., T1234567890123)
2. Transaction date	Date of supply
3. Description of goods/services	Sufficient detail to identify the supply
4. Tax-rate-separated amounts	Separate totals for 10% and 8% items
5. Consumption tax amount by rate	Tax amount for each rate category
6. Recipient name	Name of the purchaser

Registration [T1]

Registration

Detail	Value
Application form	適格請求書発行事業者の登録申請書
Filing	Via e-Tax or paper to tax office
Effect	Once registered, MUST remain taxable even if sales fall below JPY 10M
Cancellation	Must submit cancellation notice; effective from following fiscal year

Transitional Measures for Purchasers (2023-2029) [T1]

Transitional Measures for Purchasers (2023-2029)

Period	Input Tax Credit from Non-Registered Suppliers
Oct 2023 -- Sep 2026	80% of input tax creditable
Oct 2026 -- Sep 2029	50% of input tax creditable
Oct 2029 onward	0% -- no credit without qualified invoice

Small Business Special Measure (2割特例) [T1]

Small Business Special Measure (2割特例)

Detail	Value
Eligibility	Businesses that became taxable solely due to invoice registration
Tax calculation	Tax payable = Output tax x 20% (i.e., deemed input tax = 80%)
Duration	Available through returns for periods ending by September 30, 2026
Election	No prior filing needed; elect on the return

Step 4: Computation -- General Method (本則課税) [T1]

Legislation: Consumption Tax Act, Art. 30

Computation Steps -- General Method (Consumption Tax Act, Art. 30)

Step	Action
4.1	Calculate total output tax: sum of (taxable sales x applicable rate)
4.2	Separate output tax by rate: 7.8% national + 2.2% local (standard); 6.24% + 1.76% (reduced)
4.3	Calculate total input tax: sum of (taxable purchases x applicable rate) from qualified invoices
4.4	If taxable sales ratio (課税売上割合) >= 95% AND taxable sales <= JPY 500M: full input tax credit
4.5	If taxable sales ratio < 95% or taxable sales > JPY 500M: apply proportional method or individual method [T2]
4.6	Tax payable = Output tax - Input tax credit

Taxable Sales Ratio [T1]

• Taxable sales ratio — Taxable sales ratio = Taxable sales / (Taxable sales + Exempt sales) (Consumption Tax Act, Art. 30)

Step 5: Computation -- Simplified Taxation (簡易課税) [T1]

Legislation: Consumption Tax Act, Art. 37

Eligibility [T1]

Eligibility (Consumption Tax Act, Art. 37)

Requirement	Detail
Base period taxable sales	<= JPY 50,000,000
Election	Must submit 消費税簡易課税制度選択届出書 by the day BEFORE the start of the taxable period

Deemed Purchase Ratios by Business Type [T1]

Deemed Purchase Ratios by Business Type

Type	Business Category	Deemed Purchase Ratio
Type 1	Wholesale	90%
Type 2	Retail	80%
Type 3	Manufacturing, mining, construction, agriculture	70%
Type 4	Other (restaurants, etc.)	60%
Type 5	Services, transport	50%
Type 6	Real estate	40%

Computation [T1]

Computation -- Simplified Taxation

Step	Action
5.1	Calculate output tax on all taxable sales
5.2	Deemed input tax = Output tax x deemed purchase ratio
5.3	Tax payable = Output tax - Deemed input tax

• Multiple business types rule — If business spans multiple types, use the type with the highest sales proportion (or weighted average if no single type exceeds 75%).

Step 6: Filing and Payment [T1]

Legislation: Consumption Tax Act, Art. 45, 49

Filing and Payment (Consumption Tax Act, Art. 45, 49)

Item	Detail
Filing deadline	March 31 of the following year (sole proprietors)
Payment deadline	Same as filing deadline
Interim filing	Required if prior-year tax >= JPY 480,000 (quarterly/monthly instalments)
Filing method	e-Tax (mandatory for certain businesses) or paper
Form	消費税及び地方消費税の確定申告書

Interim Filing Thresholds [T1]

Interim Filing Thresholds

Prior-Year Annual Tax	Interim Frequency
< JPY 480,000	None
JPY 480,000 -- JPY 4,000,000	1 interim (mid-year)
JPY 4,000,001 -- JPY 48,000,000	3 interim (quarterly)
> JPY 48,000,000	11 interim (monthly)

Step 7: Edge Case Registry

EC1 -- Freelancer newly registered for qualified invoice [T1]

Situation: Freelancer with JPY 5M sales registers as qualified invoice issuer starting October 2023. Previously tax-exempt. Resolution: Becomes taxable from registration date. May use the 2割特例 (20% special measure) through periods ending September 2026, paying only 20% of output tax as consumption tax. No need to track actual input tax.

EC2 -- Mixed standard and reduced rate supplies [T1]

Situation: Catering business sells takeout food (8%) and dine-in meals (10%). Resolution: Must separately track and invoice 8% and 10% items. Takeout food = 8%. Dine-in = 10%. Customer's stated intention at time of purchase determines rate.

EC3 -- Simplified taxation with multiple business types [T2]

Situation: Client operates a retail shop (Type 2, 80%) and a consulting practice (Type 5, 50%). Resolution: If one type exceeds 75% of total taxable sales, apply that ratio to all sales. Otherwise, apply each ratio to its respective sales, or use the weighted average. [T2] Flag for reviewer to confirm classification.

EC4 -- Forgot to submit simplified taxation election [T1]

Situation: Client wanted simplified taxation for 2025 but did not submit election form by December 31, 2024. Resolution: Cannot use simplified taxation for 2025. Must use general method. Election takes effect from the FOLLOWING taxable period.

EC5 -- Export sales and zero-rating [T1]

Situation: Freelance designer sells services to a US client. Resolution: Services provided to non-residents and consumed outside Japan are export-exempt (0%). No output tax, but input tax on related purchases is still creditable. Must retain proof of export (contracts, payment records).

EC6 -- Straddling the JPY 10M threshold [T2]

Situation: Base period sales were JPY 9,800,000 but specified period sales were JPY 11,000,000. Resolution: Check specified period wages. If wages also exceed JPY 10M, becomes taxable. If wages <= JPY 10M, may remain tax-exempt despite sales exceeding threshold. [T2] Flag for reviewer.

Step 8: Test Suite

Test 1 -- Standard freelancer, general method

Input: Software developer, taxable sales JPY 15,000,000 (all 10%), taxable purchases JPY 3,000,000 (all 10%), qualified invoices retained. Expected output:

• Output tax: 15,000,000 x 10/110 = JPY 1,363,636
• Input tax: 3,000,000 x 10/110 = JPY 272,727
• Tax payable: 1,363,636 - 272,727 = JPY 1,090,909

Test 2 -- Simplified taxation, Type 5 (services)

Input: Consultant, taxable sales JPY 8,000,000 (all 10%), elected simplified taxation. Expected output:

• Output tax: 8,000,000 x 10/110 = JPY 727,272
• Deemed input: 727,272 x 50% = JPY 363,636
• Tax payable: 727,272 - 363,636 = JPY 363,636

Test 3 -- 2割特例 (20% special measure)

Input: Freelancer registered for invoice system, previously tax-exempt. Sales JPY 6,000,000 (all 10%). Expected output:

• Output tax: 6,000,000 x 10/110 = JPY 545,454
• Tax payable: 545,454 x 20% = JPY 109,090

Test 4 -- Mixed rate sales

Input: Food producer: JPY 5,000,000 retail food sales (8%) + JPY 2,000,000 catering/dine-in (10%). Expected output:

• Output tax (8%): 5,000,000 x 8/108 = JPY 370,370
• Output tax (10%): 2,000,000 x 10/110 = JPY 181,818
• Total output tax: JPY 552,188
• (Input tax calculated separately by method chosen)

Test 5 -- Below threshold, not registered

Input: Freelancer, base period sales JPY 8,000,000, not registered as invoice issuer. Expected output: Tax-exempt business (免税事業者). No consumption tax filing required.

PROHIBITIONS

• NEVER allow input tax credit without a qualified invoice (from October 2023 onward, subject to transitional measures)
• NEVER apply the reduced 8% rate to dine-in meals or alcoholic beverages
• NEVER use simplified taxation without a prior-period election form submission
• NEVER apply simplified taxation if base period sales exceed JPY 50,000,000
• NEVER forget to separate national consumption tax (7.8%/6.24%) from local consumption tax (2.2%/1.76%) on the return
• NEVER allow the 2割特例 for businesses that were already taxable before the invoice system
• NEVER treat export sales as taxable -- they are zero-rated with full input tax credit
• NEVER present calculations as definitive -- always label as estimated and direct client to a qualified 税理士

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a 税理士 or equivalent licensed practitioner in Japan) before filing or acting upon.

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