Simplified vs general consumption-tax calculation
Eligibility, deemed purchase ratios, actual input tax, lock-in periods, and examples.
The simplified method (electable when base-period taxable sales are ≤¥50M) replaces actual input-tax tracking with a deemed purchase ratio (40–90% by business type), while the general method uses your real input tax — the election has deadlines and a lock-in, so model it first.
Effective: 2026-01-01 to 2026-12-31
Professional review pending — treat as draft and confirm with the authorities.
Key points
- Simplified: electable at ≤¥50M base-period taxable sales.
- It uses deemed purchase ratios (40–90%) by business category.
- General method uses your actual input tax (better if you have big inputs).
- The election has filing deadlines and a lock-in period.
The two methods
Under the general (本則) method you compute output tax minus your actual input tax. Under the simplified (簡易課税) method — available when base-period taxable sales are ¥50M or less and you elect it — you skip actual input tracking and apply a deemed purchase ratio by business category (90%, 80%, 70%, 60%, 50%, or 40%). A service business with few taxable purchases often pays less under simplified; a business with large taxable inputs may prefer general.
Election and lock-in
The simplified election has filing deadlines and generally locks you in for a period, so you cannot switch year to year to chase the lower result. If you expect a large future purchase (equipment, inventory) that would generate big input credits, the general method may be better that year. Model both before electing, especially at first registration.
Who this is for
- Taxable freelancers ≤¥50M sales
- Anyone choosing a method
What this is not
- Businesses above ¥50M base-period sales
- The election locks in; a big planned purchase year may favor the general method.
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.