Consumption tax exemption threshold: taxable sales of JPY 10,000,000 or less in the base period, in principle; watch the specified period tooWhen do you not have to pay consumption tax? The guide is JPY 10,000,000
If taxable sales in the base period are JPY 10,000,000 or less, the obligation to pay consumption tax is in principle exempted. However, the exemption does not apply if taxable sales (or salaries and similar payments) in the specified period exceed JPY 10,000,000, or if the business has registered as a qualified invoice issuer, among other cases.
Key points
- The base period is the year before last for an individual business operator, and the business year before last for a corporation
- The specified period is January 1 to June 30 of the previous year for an individual, and in principle the first six months of the previous business year for a corporation
- The specified period test can also be made using the total of salaries and similar payments instead of taxable sales
- A qualified invoice issuer is not exempt, regardless of its sales in the base period
- Even a newly established corporation with no base period is not exempt if its capital at the start of the business year is JPY 10,000,000 or more
What to do in practice
- Check taxable sales for the year before last (business year before last), and sales and salary payments for the specified period
- If you are registered for the invoice system, assume that you will be a taxable business operator regardless of the exemption threshold test
In principle, a business whose sales two years ago were JPY 10,000,000 or less does not have to pay consumption tax. But if it has registered for the invoice system, or its recent sales or salary payments have been large, it will have to pay.
- ○Applies: Sales two years ago were JPY 10,000,000 or less, and you have not registered for the invoice system
- ×Does not apply: You registered for the invoice system
- ×Does not apply: Sales (or salaries) for January to June of last year went over JPY 10,000,000
Points
- If sales two years ago were JPY 10,000,000 or less, you basically do not have to pay
- If sales or salaries in the first half (January to June) of last year were over JPY 10,000,000, you pay
- Anyone who registered for the invoice system pays, no matter what their sales are
What the words mean
- Base period
- The past year you look at to decide whether you pay (for an individual, two years ago)
- National Tax Agency (NTA): NTA: No. 6501 Exemption from the obligation to pay tax
- National Tax Agency (NTA): NTA: No. 6531 When starting a new business or establishing a new corporation
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.