What to consider when you are asked to register an invoice

One year will have passed next month since the invoice system started.

Although the system is widely known, many businesses that have been exempt from consumption tax until now are still unsure as to whether they should register for invoices or whether they should reduce the amount of consumption tax they are charging.

In this article, I will explain what you should consider when you are asked to register for invoices.

What happens when you register an invoice?

If you register an invoice, you will be obligated to declare and pay consumption tax.

This is necessary even if your sales amount is small.

It’s always better to have accounting software, but if you want to use the 20% exemption, you can file your tax return by the National Tax Agency’s tax return preparation corner site even if you don’t have it.
(The 20% exemption is a system that allows you to pay 20% of the consumption tax included in your sales.)

If you use the 20% exemption, you will pay 20% of the consumption tax included in your sales, but you will keep 80%.

In summary, if you register an invoice,

• The process of filing and paying consumption tax will increase
• Your take-home amount will be reduced by 20% of the consumption tax included in your sales (80% will remain in your hands)

The case if deducting the consumption tax amount

The pros and cons of deducting the consumption tax amount are the opposite of those of registering an invoice.

In other words,

• No need to bother with reporting and paying consumption tax
  (as before)
• The net amount of the sales will be reduced by 100% of the consumption tax included in the sales

Examples

Let’s compare the two with a concrete example.

Let’s consider the case of 8.8 million yen in sales including tax and 4 million yen in expenses.

1. When an invoice is registered

Sales of 8.8 million yen – Expenses of 4 million yen = 4.4 million yen

will remain in your hands first.

Consumption tax will be paid from that amount.

If the 20% exception is used in the tax calculation,

800,000 yen x 20% = 160,000 yen

Therefore, the net amount will be

4.4 million yen – 160,000 yen = 4.24 million yen.

2. When the consumption tax is deducted and billed

As with the previous example, let’s consider the case of 8.8 million yen in sales including tax and 4 million yen in expenses.

The sales will be deducted and billed for the consumption tax included in the sales, so the sales will be 8 million yen.

Therefore,

Sales of 8 million yen – Expenses of 4 million yen = 4 million yen

will be the net amount.
(No consumption tax is paid)

3. Verdict

• The net amount if you register an invoice is 4.24 million yen
• The net amount if you deduct the consumption tax is 4 million yen

The net amount is higher if you register an invoice.

However, if you think that the hassle of filing and paying the consumption tax will be reduced by 240,000 yen, you can also choose to deduct the consumption tax.

Conclusion

In this article, I explained what to consider when you are asked to register an invoice.

• Choosing to register an invoice
• Choosing not to charge consumption tax

Either option depends on how you view the advantages and disadvantages of each.

There’s no problem with either option.

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

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