Deadline for the 20% consumption tax exemption and subsequent actions

It has been about two years since the 20% exemption for consumption tax returns was introduced.

We will review the deadline and subsequent steps.

Deadline

The deadline for applying the 20% exemption is the tax period ending September 30, 2026.
(As of the time of writing)

Therefore,

For sole proprietors, the deadline is the end of 2026.

For corporations, the deadline is the fiscal year ending August 2027.
(if the fiscal year ends in August)

Even if you start your business or register your invoices after October 1, 2026,

individuals can apply the 20% exemption for their 2026 consumption tax return.
(The tax period for individuals is always January 1 to December 31)

Subsequent actions

Once the 20% exemption deadline has expired,

You can choose from two methods for filing your consumption tax return:

・Standard (adding up the consumption tax amount for sales and expenses)

・Simplified taxation (calculating the consumption tax amount for sales multiplied by a fixed percentage)

For small businesses with sales of less than 10 million yen,

considering the accounting hassle (checking invoice registration numbers),

it is more advantageous to apply simplified taxation.

However, depending on the situation, using the standard calculation may result in a lower tax payment.

It all depends on your perspective, and preferences will vary based on whether you want to take the hassle or reduce your tax payment.

Points to note

To apply for simplified taxation,

• Taxable sales for the two years prior must be less than 50 million yen.
• Advance notification must be submitted.

As a general rule, notification must be submitted before the start of the tax period to which you wish to apply simplified taxation.
(If you wish to apply simplified taxation from 2027, you must submit the notification by the end of 2026.)

However, if you file a tax return under the 20% exemption in 2026,

the deadline for submitting the notification is the end of 2027.

Therefore,

if you calculated your tax amount using the standard method at the beginning of 2027,

but after calculating your tax amount, you find that simplified taxation is more advantageous,

you can submit a simplified taxation notification in December 2027.

This is possible.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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