What is the 20% exception for sales under the consumption tax invoice system in Japan?

In the invoice system, there is a system called 20% exception of sales in Japan.
(To be precise, it is a special exception that pays 20% of the consumption tax included in sales)

By using this system, if a proprietor who has been exempted from paying consumption tax (tax-exempt proprietor) has registered an invoice system as paying consumption tax (taxable proprietor), the tax payment calculation of consumption tax can be simplified.

This time, I will write about the outline of the 20% exception of the sales of the invoice system.

Proprietors in scope

A person who was originally a tax exempt proprietor will become a taxable proprietor from October 2023 by registering an invoice system.

As examples of out of scope list below.

・If you have been a taxable proprietor before September 2023

For example, a person who was originally a tax-exempt proprietor submitted a taxable proprietor selection notification form in 2022 and became a taxable proprietor from January 2023.
(However, if you submit a taxable proprietor selection non-application notification form by December 2023, you will be a tax exempt proprietor from January to September and a taxable proprietor from October, and you can apply the 20% special exemption.)

・If you are already a taxable proprietor regardless of whether or not you have invoice registration

Another point to note is that it is necessary to check whether the 20% exception can be used every year.

If your sales two years ago were 10 million yen or less, you will be eligible for the 20% special exemption as a general rule.
(In the example below, the year 2024 applies.)

Year　Sales
2021：12 million yen
2022：9 million yen
2023：10 million yen（20% exception is not applied because 2021 sales are 12 million yen > 10 million yen)
2024：12 million yen（20% exception is applied because sales in 2022 are 9 million yen ≤ 10 million yen)

amount of tax payment

20% of the consumption tax included in sales will be paid.

For example, if the sales are 9 million yen (excluding tax),

9 million yen (excluding tax) x 10% (consumption tax rate) x 20% = 180,000 yen

is the amount of tax payment.

procedure

After registering the invoice, there is no pre-procedure to receive the 20% exception.

All you have to do is to state that you will receive a 20% exception on the consumption tax return to be submitted to the tax office.

Applicable period

Applicable for the taxable period from 1st October 2023 to 30th September 2026.

From October 1, 2023, it is possible to apply the 20% exception for three years until 2026.

In conclusion

This time, I wrote about the 20% exception for the sales of the invoice system.

Compared to other taxes, the consumption tax has a more complicated self-assessment system, so you need to be careful.

If you have any questions, please contact us here.

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

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