Consumption Tax Exemption: Who Qualifies and What You Get
Learn if your small business qualifies for consumption tax exemption and how the new invoice system affects your status in Japan.
This scheme allows small businesses with limited annual sales to avoid the complex process of collecting and paying consumption tax.
Who it's for
This is designed for businesses whose annual taxable sales remain under ¥10 million.
What you get
If you qualify, you are exempt from the requirement to collect consumption tax from your customers and pay it to the government.
What it costs you
While there is no direct fee to participate, you must monitor your annual revenue very closely to ensure you remain within the legal limit for exemption.
The catch to know
The introduction of the new Invoice System can make it difficult to remain exempt if your primary clients are other businesses (B2B), as they may require tax-compliant documentation from you.
How to apply
- Track your total taxable sales throughout the fiscal year.
- Check if your annual sales fall below the ¥10 million threshold.
- Consult with a tax professional regarding how the Invoice System impacts your specific client relationships.
- Contact the National Tax Agency for official filing guidance.