When you become a taxable business, how the invoice system overrides the exemption, and the simplified and 20% options.
You are normally exempt until taxable sales pass ¥10 million in the base period, but registering for the invoice system makes you a consumption-tax payer regardless — the simplified and 20% special methods can soften the cost.
The default test looks back two years: if your taxable sales in the base period (for an individual, the year two years earlier) were ¥10 million or less, you are an exempt business and do not charge or remit consumption tax. A second “specified-period” test can pull you in earlier if sales — or wages you pay — in the first half of the prior year exceed ¥10 million. New sole proprietors are therefore usually exempt for their first couple of years unless they elect otherwise.
The invoice system changed the calculus. If you register as a qualified invoice issuer to get a T-number, you become a taxable business even if your sales are well under ¥10 million. So the real decision for most small freelancers is not the ¥10 million threshold — it is whether to register for the invoice system at all.
If you are taxable, you need not always compute tax on every purchase. Under simplified taxation (available by election when base-period sales are ¥50 million or less), you estimate deductible input tax from a fixed rate for your business category, which is far less work. Separately, a temporary “20% special measure” has let many newly registered small businesses pay just 20% of the tax on their sales, sharply reducing both cost and paperwork.
These measures are date-sensitive and being revised: the 20% special measure applies through the tax period covering the changeover in 2026, and the buyer-side transitional credit for purchases from unregistered suppliers steps down from 80% to 50% from October 2026. Because eligibility, elections, and end dates all turn on your specific year, confirm the current position with the NTA or a 税理士 before you rely on any of them.
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By default you are an exempt business until taxable sales in the base period (for an individual, the year two years earlier) exceed ¥10 million; a specified-period test on the prior year’s first half can also trigger it. However, registering for the invoice system to issue a T-number makes you a taxable business even below ¥10 million. Taxable businesses can often reduce the calculation using simplified taxation or the temporary 20% special measure, both of which are date-sensitive and being revised through 2026–2029 — confirm your year with the NTA or a 税理士.
It depends on your clients. Registering gives you a T-number so business clients can claim consumption-tax input credits on what they pay you — but it also makes you a consumption-tax payer, adding cost and paperwork. If your clients are consumers or tax-exempt small businesses, registering may add cost for no benefit. If your clients are companies that demand qualified invoices, not registering can cost you work. Weigh your client base; a transitional credit for buyers from unregistered suppliers is stepping down over time.