Things small businesses should consider before filing a consumption tax return using the 20% invoice special exception

When registering an invoice and becoming a consumption tax payer, there are three methods for calculating the consumption tax return payment amount for small businesses (annual sales of less than 10 million yen).

・Principle
Consumption tax included in sales (Deposit consumption tax) – Consumption tax included in payment (Payment consumption tax)
= Tax payment amount

・Simple taxation
A system in which the consumption tax included in sales is classified by industry and the tax amount is a fixed percentage (10%-60%)

・20% special exception
A system where the tax amount is 20% of the consumption tax included in sales

Many business owners will pay the least amount of tax if they choose the 20% special exemption.

However, there are some things to consider before filing a tax return using the 20% special exception.

This time, I will write about things that small businesses should consider before filing a consumption tax return using the 20% invoice exception.

Consider the principle method when paying large amounts of expenses or purchasing assets

As mentioned earlier, the basic method for calculating the amount of consumption tax paid is as following formula.

Deposit consumption tax – Payment consumption tax

Normally,

Consumption tax held > Consumption tax paid

but depending on the case,

Deposit consumption tax <Payment consumption tax

It may become.

In what case,

・Expenses were higher than sales (business made loss)

・Purchased expensive assets

In these cases, if the consumption tax payment amount is calculated using the principle method, it will be refunded.
(Because the consumption tax paid will be higher than the consumption tax received)

For the 20% special exception, you must pay 20% of the deposited consumption tax.

Therefore, if you use the principle-based calculation method, you will receive a refund, which is an advantageous choice.

In conclusion

This time, I wrote about things that small businesses should consider before filing a tax return using the 20% invoice exception.

・Those who plan to purchase expensive assets

・Those whose business is expected to be loss

We recommend that those above also consider the principle-based method for determining the amount of consumption tax to be paid.
(The method based on the principle requires the time and effort of tallying the consumption tax paid, so if you do this in advance, you can estimate it smoothly.)

If you have any quesntions, please feel free to 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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