The 20% special rule ends with the taxable period that includes September 30, 2026 (Reiwa 8): preparing for what comes nextThe special rule where you pay only 20% of the sales consumption tax is about to end
The "20% special rule" lets a formerly tax-exempt business operator that became a qualified invoice issuer and a taxable business operator limit its tax payable to 20% of the tax on sales. The last taxable period it covers is the one that includes a day up to September 30, 2026 (Reiwa 8). From the next period, you need to consider filing under the general method or the simplified method.
- Consumption tax on sales
- JPY 1,000,000
- x 20%
- 20%
- Tax payable
- JPY 200,000
Key points
- It applies to taxable periods that include a day from October 1, 2023 (Reiwa 5) to September 30, 2026 (Reiwa 8).
- Tax payable is 20% of the consumption tax on sales.
- Requirements include that taxable sales in the base period are JPY 10 million or less.
- For corporations with a March year-end, the fiscal year ending March 2027 (Reiwa 9) is the last; for sole proprietors, 2026 (Reiwa 8) is the last.
- There is a special rule on the deadline for the notification when switching to the simplified method (for the period after one that used the 20% rule, the notification is due by the filing deadline).
What to do in practice
- Check which of your taxable periods includes September 30, 2026 (Reiwa 8).
- Estimate whether to use the general method or the simplified method from the next period.
The 20% special rule is a rule that greatly reduces the consumption tax paid by people who run a small business and newly registered for the invoice system. You can use it only up to the period that includes September 30, 2026 (Reiwa 8).
- October 1, 2023 (Reiwa 5)This rule starts
- September 30, 2026 (Reiwa 8)The period that includes this day is the last
- Sole proprietors2026 (Reiwa 8) is the last
- Companies with a March year-endThe fiscal year ending March 2027 (Reiwa 9) is the last
Points
- You only need to pay 20% of the consumption tax you collected from customers.
- You can use it only up to the period that includes September 30, 2026 (Reiwa 8).
- After that, you have to choose a different way to calculate.
What the words mean
- Taxable period
- The span, such as one year, for which consumption tax is calculated. For individuals it is January to December; for companies it is the fiscal year
- National Tax Agency (NTA): NTA: Special feature on the FY2026 (Reiwa 8) tax reform (invoice system)
- National Tax Agency (NTA): NTA: Tax Answer No. 6498 Qualified invoice system (適格請求書等保存方式) (invoice system)
- National Tax Agency (NTA): NTA: 20% special rule (2-wari tokurei) dedicated page
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.