Simplified taxation: deemed purchase rates by business category, for taxable sales of JPY 50 million or less in the base periodA simple way to calculate the consumption tax on purchases as "roughly this much"
Under the simplified taxation system, the deductible input tax is calculated by multiplying the consumption tax on sales by the deemed purchase rate for each business category. It applies to taxable periods in which taxable sales in the base period were JPY 50 million or less, and a notification must be filed.
Key points
- Deemed purchase rates: Category 1 (wholesale) 90%, Category 2 (retail, etc.) 80%, Category 3 (manufacturing, construction, etc.) 70%, Category 4 (other) 60%, Category 5 (transport and communications, finance and insurance, services, etc.) 50%, Category 6 (real estate) 40%
- To apply it, file the Notification of Selection of the Simplified Consumption Tax System by the day before the first day of the taxable period
- If sales from one type of business account for 75% or more of total sales, that business's deemed purchase rate can be applied to all sales (the 75% rule)
- A notification to stop using it can be filed only on or after the first day of the taxable period that includes the day 2 years after the first day of the taxable period in which the selection took effect
What to do in practice
- Check your own business category, and estimate whether the general method or simplified taxation is more favorable.
- File the notification by the day before the first day of the period in which you want it to apply.
When you pay consumption tax, adding up every purchase in detail is a lot of work. Simplified taxation is a system that uses a set percentage for each type of business to roughly work out how much you can subtract. To use it, you have to file a notice beforehand.
- Consumption tax collected
- JPY 1,000,000
- Amount that can be subtracted (50%)
- - JPY 500,000
- Consumption tax to pay
- JPY 500,000
Points
- The percentage is set for each type of business.
- Only businesses with small sales can use it.
- File the notice by the day before the period in which you want to use it begins.
What the words mean
- Deemed purchase rate
- A set percentage that says, "let's treat it as if this much was spent on purchases"
- National Tax Agency: National Tax Agency: No. 6505 Simplified taxation system
- National Tax Agency: National Tax Agency: Fiscal 2026 (Reiwa 8) tax reform feature (invoice system)
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.