Japan’s ¥10 million consumption-tax threshold
Taxable sales vs profit, base period, specified period, and new-business exceptions.
The ¥10M threshold is about taxable sales in the base period (normally two years prior), not profit — so a low-margin business can be liable — and new businesses can still be taxable through the specified-period test, election, or invoice registration.
Effective: 2026-01-01 to 2026-12-31
Professional review pending — treat as draft and confirm with the authorities.
Key points
- The measure is taxable sales, not profit.
- Base period for an individual is normally the second preceding year.
- The specified-period test can make you taxable sooner.
- A new business is not automatically exempt.
Sales, not profit
The common misunderstanding is that ¥10M refers to profit. It refers to taxable sales in the base period — for an individual, normally the year two years earlier. A business with high turnover but thin margins can cross the line while a high-profit consultancy with modest billings may not. Measure taxable sales specifically, excluding non-taxable items.
New businesses and exceptions
A new business has no base period at first, which is why it is often exempt for the first years — but not always. The first-half specified-period test (using sales or wages) can make you taxable in year two, a voluntary election can be chosen, and invoice registration overrides exemption entirely. Model your trajectory before assuming two tax-free years.
Who this is for
- Freelancers approaching ¥10M sales
- New business owners
What this is not
- Exact election timing (get advice)
- A new business is not guaranteed two exempt years; the specified-period test can apply.
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.