Consumption tax for sole proprietors
Taxable sales, exemption, base periods, input credits, rates, and records.
A sole proprietor is generally exempt from consumption tax when base-period taxable sales (normally two years prior) do not exceed ¥10M, but the exemption can be lost by the specified-period test, a voluntary election, succession, or qualified-invoice registration.
Effective: 2026-01-01 to 2026-12-31
Professional review pending — treat as draft and confirm with the authorities.
Key points
- Exempt when base-period taxable sales ≤ ¥10M (normally two years prior).
- Exemption can be lost by the specified-period test or a voluntary election.
- Qualified-invoice registration makes you taxable even below ¥10M.
- Taxable sales ≠ profit; test them separately.
Who is exempt
For an individual, the base period is normally the second preceding year, and if taxable sales there did not exceed ¥10M you are generally an exempt (免税) business. But the exemption can be lost through the first-half “specified period” test, a voluntary taxable-business election, succession rules, or — importantly — registering as a qualified-invoice issuer, which makes you taxable regardless of sales.
Paying it
A taxable business charges consumption tax on sales and remits the balance after input-tax credits (or uses the simplified method). Rates are the standard rate and the reduced rate for certain items. Because taxable sales — not profit — determine liability, a low-profit business can still exceed the ¥10M threshold. Keep the books and invoices needed for input credits for seven years.
Who this is for
- Growing freelancers near ¥10M
- Anyone weighing invoice registration
What this is not
- Corporate consumption-tax rules
- Registering for the invoice system makes an otherwise-exempt business liable for consumption tax.
Frequently asked questions
Do I need to file a tax return in Japan?
Many employees do not, because tax is settled by year-end adjustment (年末調整). You generally must file (確定申告) if you have side income over ¥200,000, two or more employers, self-employment income, sizeable investment or crypto gains, or you want to claim deductions like large medical costs or a first-year mortgage credit. Filing season is Feb 16 – Mar 15 via e-Tax. When unsure, check the NTA guidance or ask a 税理士.