How long does the invoice 20% special provision last? Choosing the 30% special provision or simplified taxation after it ends in 2026
The "20% special provision" (a measure that lets you set your consumption tax at 20% of the tax on sales) has eased the burden on people who became taxable businesses because of the invoice system. It is not a permanent scheme: by law, it ends with the taxable period that includes September 30, 2026. For sole proprietors, the 2026 tax year (filed in March 2027) is the last.
Your burden does not jump all at once, though. Sole proprietors have the 30% special provision for the 2027 and 2028 tax years. The notification for moving to simplified taxation can also wait until the following year's filing deadline. This article organizes the timing of the end, the 30% special provision, and how to choose between simplified and general taxation, using primary information from the National Tax Agency.
・20% special provision: for individuals, through the 2026 tax year (for corporations, through the fiscal year that includes September 30, 2026).
・After that, individuals can move to the 30% special provision (for the 2027 and 2028 tax years, 30% of the tax on sales), created — and already enacted — by the FY2026 tax reform.
・The notification for simplified taxation is due by the following year's final tax return deadline. For an individual using it from the 2027 tax year, that is March 31, 2028.
・Ultimately you choose from general taxation, simplified taxation, or a return to tax-exempt business status. Whether it is advantageous or not varies by industry.
What is the 20% special provision, exactly (a recap)
The 20% special provision is a burden-easing measure for small businesses that went from tax-exempt to taxable (invoice-issuing) businesses because of the invoice system[National Tax Agency].
- Regardless of industry, you can deduct 80% of the tax on sales (in effect equivalent to a deemed purchase rate of 80%)
- No prior notification is required. You simply add a note on your final tax return that "the 20% special provision is applied"
- At each filing you can choose whichever is more advantageous among the general and simplified methods
How long? Timeline of the 20% special provision, the 30% special provision, and what follows
| Category | Period it can be applied |
|---|---|
| 20% special provision | October 1, 2023 – the taxable period that includes September 30, 2026 (individuals = 2026 tax year; corporations = the fiscal year that includes that date) |
| 30% special provision (individuals only; new) | Filings for the 2027 and 2028 tax years |
| General taxation / simplified taxation | From the 2029 tax year onward (for corporations, after the 20% special provision ends) |
* The 30% special provision was created by the FY2026 tax reform and is already enacted and in force (Supplementary Provision 51-3 of the 2016 amending act)[National Tax Agency Invoice Q&A No.114-2 (in Japanese)]. It covers the 2027 and 2028 tax years of sole proprietors; corporations are excluded[Ministry of Finance, outline of the FY2026 tax reform (in Japanese)].
A one-month difference in your fiscal year-end shifts the end by a year
There is only one rule. The last taxable period is the one that includes September 30, 2026 (Reiwa 8)[National Tax Agency, overview of the 20% special provision (in Japanese)]. For a corporation, the taxable period is the same as its fiscal year[National Tax Agency No.6137 (in Japanese)].
So corporations whose year-end falls in September to December have a Reiwa 8 period as their last, while those with a January to August year-end have a Reiwa 9 period. A September-year-end company finishes at the end of September 2026; an August-year-end company can use it until the end of August 2027. One month of difference shifts the usable period by almost a full year.
| Fiscal year-end | Last taxable period with the 20% provision | Last day of that period |
|---|---|---|
| Sole proprietor | 2026 tax year | December 31, 2026 |
| September | Period ending September 2026 | September 30, 2026 |
| October | Period ending October 2026 | October 31, 2026 |
| November | Period ending November 2026 | November 30, 2026 |
| December | Period ending December 2026 | December 31, 2026 |
| January | Period ending January 2027 | January 31, 2027 |
| February | Period ending February 2027 | February 28, 2027 |
| March | Period ending March 2027 | March 31, 2027 |
| April | Period ending April 2027 | April 30, 2027 |
| May | Period ending May 2027 | May 31, 2027 |
| June | Period ending June 2027 | June 30, 2027 |
| July | Period ending July 2027 | July 31, 2027 |
| August | Period ending August 2027 | August 31, 2027 |
Our own calculation, applying the rule "the last period is the one that includes September 30, 2026" to each fiscal year-end (National Tax Agency, overview of the 20% special provision; No.6137 Taxable period).
[30% special provision] 30% of the tax on sales for individuals in 2027 and 2028 (already enacted)
The 30% special provision is not a proposal under discussion. It was created by the FY2026 tax reform and is already enacted and in force (Supplementary Provision 51-3 of the 2016 amending act)[National Tax Agency Invoice Q&A No.114-2 (in Japanese)]. It covers the 2027 and 2028 tax years of sole proprietors; corporations are excluded[Ministry of Finance, outline of the FY2026 tax reform (in Japanese)].
As with the 20% special provision, no notification is required. You simply add a note on your final tax return that you are applying it[National Tax Agency Invoice Q&A No.114-2 (in Japanese)]. You can compare it with general and simplified taxation for each taxable period and pick the better one.
It applies to sole proprietors registered as invoice issuers. Taxable periods where taxable sales in the base period (two years earlier) exceed ¥10 million are excluded, among others[National Tax Agency Invoice Q&A No.115-2 (in Japanese)]. The deduction ratio falls from 80% to 70%, but that is gentler than going straight to general or simplified taxation.
* From April 1, 2028, the consideration for transfers of specified small-value assets is excluded from the base amount used in the 30% calculation[National Tax Agency Invoice Q&A No.114-2 (in Japanese)].
Three options after it ends
General taxation (regular taxation)
Deduct the consumption tax on the purchases and expenses you actually paid. Retaining invoices is required. Tends to be advantageous in years with large capital investment, or in industries with heavy purchasing.
Simplified taxation (deemed purchase rates)
Calculated using the industry-specific "deemed purchase rate." The condition is taxable sales of ¥50 million or less in the base period. Prior notification is required (see below). Suited to industries with little purchasing.
Return to tax-exempt business
If you cancel your invoice registration, you can return to tax-exempt status (taxable sales of ¥10 million or less in the base period). However, you will no longer be able to issue invoices (see the caution below).
* For the 2027 and 2028 tax years, sole proprietors can also choose the 30% special provision, so they have four options (corporations have three). To decide between the 30% special provision and simplified taxation, compare which is more advantageous for your industry.
The simplified method's "deemed purchase rate" (by industry)
Under simplified taxation, you deduct using a deemed purchase rate set for each industry[National Tax Agency No.6509]. The higher the deduction rate (the less tax payable), the more advantageous.
| Business category | Main industries | Deemed purchase rate |
|---|---|---|
| Category 1 | Wholesale | 90% |
| Category 2 | Retail, agriculture/forestry/fisheries (food and drink) | 80% |
| Category 3 | Manufacturing, construction, etc. | 70% |
| Category 4 | Restaurant business, etc. | 60% |
| Category 5 | Services, transport, finance, etc. | 50% |
| Category 6 | Real estate | 40% |
The 20% special provision gave an 80% deduction regardless of industry. If you switch to simplified taxation, wholesale (90%) and retail (80%) are equal or better, but for services (50%) and real estate (40%) the deduction drops sharply and the tax payable increases. Freelancers in service industries are a group hit especially hard.
One formula decides it: how many times the 20% provision you will pay
Every method uses the same formula. Only the deduction ratio changes.
Our own formula. The deduction ratio is 80% under the 20% special provision, 70% under the 30% special provision, and the industry deemed purchase rate under simplified taxation (National Tax Agency No.6505). Under general taxation it is your actual taxable purchase ratio.
When the deduction ratio falls from 80% to 60%, the tax payable doubles exactly. Conversely, a wholesaler (Category 1, 90%) pays half as much under simplified taxation. The end of the 20% special provision is not automatically a tax increase.
| Where you move to | Deduction ratio | Multiple of the 20% provision | Example industries |
|---|---|---|---|
| Simplified, Category 1 | 90% | 0.5× | Wholesale |
| Simplified, Category 2 | 80% | 1.0× | Retail, agriculture/forestry/fisheries (food and drink) |
| 30% special provision | 70% | 1.5× | Sole proprietors, 2027 and 2028 tax years |
| Simplified, Category 3 | 70% | 1.5× | Manufacturing, construction |
| Simplified, Category 4 | 60% | 2.0× | Restaurant business |
| Simplified, Category 5 | 50% | 2.5× | Services, transport, finance |
| Simplified, Category 6 | 40% | 3.0× | Real estate |
| General taxation | 30% (assumed) | 3.5× | Freelancers with few expenses |
Our own calculation. Deemed purchase rates are from National Tax Agency No.6505. The general taxation row assumes taxable purchases (excluding tax) equal to 30% of sales.
The National Tax Agency itself explains that a retailer pays less under simplified taxation with its 80% deemed purchase rate than under the 30% special provision[National Tax Agency Invoice Q&A No.117-3 (in Japanese)]. The 30% provision is easy because it needs no notification, but it is not the best choice for every industry. Check your business category first.
Tax payable at sales of ¥5 million, ¥8 million and ¥10 million
First, take a service business (Category 5) with sales of ¥8 million excluding tax. The consumption tax on those sales is ¥800,000. Simply changing the calculation method moves the tax payable from ¥160,000 to ¥400,000.
Widening this to three levels of sales gives the table below. The increase in the 2027 tax year is exactly 1% of sales excluding tax. At ¥8 million of sales, that is ¥80,000 more.
| Method | Sales ¥5 million | ¥8 million | ¥10 million |
|---|---|---|---|
| 20% special provision | ¥100,000 | ¥160,000 | ¥200,000 |
| 30% provision / simplified Cat. 3 | ¥150,000 | ¥240,000 | ¥300,000 |
| Simplified, Category 1 | ¥50,000 | ¥80,000 | ¥100,000 |
| Simplified, Category 2 | ¥100,000 | ¥160,000 | ¥200,000 |
| Simplified, Category 4 | ¥200,000 | ¥320,000 | ¥400,000 |
| Simplified, Category 5 | ¥250,000 | ¥400,000 | ¥500,000 |
| Simplified, Category 6 | ¥300,000 | ¥480,000 | ¥600,000 |
| General taxation (purchases 30%) | ¥350,000 | ¥560,000 | ¥700,000 |
Our own calculation. All sales are at the standard 10% rate; general taxation assumes taxable purchases (excluding tax) of 30% of sales. Figures are national tax at 7.8% plus local consumption tax (national × 22/78). Deemed purchase rates are from National Tax Agency No.6505.
Corporations have no landing step like the 30% provision. For a December-year-end service business (Category 5) with sales of ¥8 million, ¥160,000 for the period ending December 2026 becomes ¥400,000 for the period ending December 2027. That is ¥240,000 more. Individuals climb in 1.5× steps; corporations jump straight to 2.5×.
* General taxation depends on your actual purchases and expenses, and in years with large capital investment it can beat the simplified method. Only general taxation can produce a refund[National Tax Agency Invoice Q&A No.117-3 (in Japanese)]. For the specific calculations of the three methods, see also How much consumption tax? Calculating with the general, simplified, and 20% special methods.
The simplified-taxation notification now waits until next year's filing deadline
If you used the 20% or 30% special provision and move to simplified taxation from the following taxable period, the deadline is that period's final tax return deadline[National Tax Agency Invoice Q&A No.117 (in Japanese)]. The FY2026 tax reform relaxed it from "during the following taxable period" (Supplementary Provisions 51-2(6) and 51-3(5) of the 2016 amending act).
This difference matters. The general rule is the day before the first day of the period you want it to apply, so you must decide before the year starts[National Tax Agency No.6505 (in Japanese)]. Under the special rule, you can decide after a full year of sales and expenses is known.
| Which rule | Notification deadline | When you decide |
|---|---|---|
| General rule | The day before the first day of the period (for individuals, December 31 of the prior year) | Before the year starts |
| Period following the 20% or 30% provision | That period's final tax return deadline | After the year ends |
Here are the deadlines case by case. For an individual this is effectively 15 months of breathing room.
| Taxpayer | First period on simplified taxation | Notification deadline |
|---|---|---|
| Individual (not using the 30% provision) | 2027 tax year | March 31, 2028 |
| Individual (using the 30% provision in 2027 and 2028) | 2029 tax year | April 1, 2030 |
| December-year-end corporation | Period ending December 2027 | February 29, 2028 |
| March-year-end corporation | Period ending March 2028 | May 31, 2028 |
Sources: National Tax Agency, "The FY2026 tax reform and the invoice system," and Invoice Q&A No.117. When a filing deadline falls on a Sunday, public holiday, Saturday or December 29-31, it moves to the next day (April 1, 2030 applies because March 31 is a Sunday).
Except when you close the business, simplified taxation must be kept for two years[National Tax Agency Invoice Q&A No.117-3 (in Japanese)]. If an individual starts it in the 2027 tax year, 2028 is on simplified taxation too. People in Categories 4 to 6, where the 30% provision (70% deduction) is better, can stay on the 30% provision for 2027 and 2028 and switch to simplified taxation from 2029.
A bill to cut the consumption tax rate on food and drink to 1% for two years was approved by the Cabinet on September 15, 2026[National Tax Agency, the 1% rate cut on food and drink (in Japanese)]. The cut would run from April 1, 2027 to March 31, 2029. It is still a bill, so this is the content if the Diet passes it.
If it passes, simplified taxation gets a special calculation rule as well. That makes the extended notification deadline even more valuable. For what businesses should do, see The 1% consumption tax on food and drink and business filing deadlines; for the buyer-side deduction ratio, see The invoice 80% credit drops to 70% in October.
* Simplified taxation requires taxable sales of ¥50 million or less in the base period (two years earlier for individuals; in principle two fiscal years earlier for corporations)[National Tax Agency No.6505 (in Japanese)]. The difference from general taxation is explained in The difference between simplified and general taxation.
Under general taxation, interim filing starts at ¥8.79 million of sales
Interim filing becomes necessary when the annual consumption tax for the immediately preceding period exceeds ¥480,000[National Tax Agency No.6609 (in Japanese)]. That ¥480,000 is national tax only and does not include local consumption tax.
The annual national tax is "sales excluding tax × 7.8% × (1 − deduction ratio)." The lower the deduction ratio, the less sales it takes to reach ¥480,000.
| Method | Sales (excluding tax) where interim filing starts |
|---|---|
| 20% provision / simplified Cat. 2 | Over ¥30.76 million |
| 30% provision / simplified Cat. 3 | Over ¥20.51 million |
| Simplified, Category 4 | Over ¥15.38 million |
| Simplified, Category 5 | Over ¥12.30 million |
| Simplified, Category 6 | Over ¥10.25 million |
| General taxation (purchases 30%) | Over ¥8.79 million |
Our own calculation of the point where annual national tax = sales excluding tax × 7.8% × (1 − deduction ratio) exceeds ¥480,000 (the test itself is National Tax Agency No.6609).
Almost nobody reaches interim filing while on the 20% special provision, because it takes ¥30.76 million of sales. Under general taxation, ¥8.79 million is enough. If your 2027 annual tax exceeds ¥480,000, from 2028 you pay twice a year.
| Consumption tax (national) for the preceding period | Number of interim filings |
|---|---|
| ¥480,000 or less | Not required in principle (a voluntary interim filing system exists) |
| Over ¥480,000 up to ¥4 million | Once a year |
| Over ¥4 million up to ¥48 million | Three times a year |
| Over ¥48 million | Eleven times a year |
* Filing and payment are due within two months from the day after the end of each interim period[National Tax Agency No.6609 (in Japanese)]. The test and the due dates are explained in Consumption tax interim payments start above ¥480,000.
The "return to tax-exempt business" option and its cautions
If your customers are mainly consumers and "you won't be in trouble without invoices," you also have the option of canceling your registration and returning to tax-exempt business status. You submit a "Notification Seeking Cancellation of Registration as a Qualified Invoice Issuer"[National Tax Agency].
- The 2-year lock-in: if you became a taxable business under the transitional measure for registration, you may be unable to return to tax-exempt status until the taxable period containing the day 2 years after your registration date. People who registered in the taxable period containing October 1, 2023 are outside this lock-in.
- Impact on customers: if you return to tax-exempt status you can no longer issue invoices. Buyers can deduct only a set proportion under the transitional measure. That proportion is 70% from October 1, 2026 through September 30, 2028, 50% from October 2028, and 30% from October 2030 through September 2031[Ministry of Finance, outline of the FY2026 tax reform (in Japanese)]. It may lead to requests for price cuts.
- The ¥100 million cap: the portion of taxable purchases from a single tax-exempt supplier above ¥100 million a year is now outside the transitional measure (¥1 billion before the reform)[Ministry of Finance, outline of the FY2026 tax reform (in Japanese)]. This is covered in The invoice 80% credit drops to 70% in October.
The 30% special provision requires you to be a qualified invoice issuer[National Tax Agency Invoice Q&A No.114-2 (in Japanese)]. Going back to tax-exempt status takes the 30% provision with it. For the 2027 and 2028 tax years the real comparison is "keep paying under the 30% provision" versus "return to tax-exempt status."
* The registration decision is also explained in The invoice system and tax-exempt businesses.
Summary
FAQ
How long can I use the 20% special provision?
By law, through the taxable period that includes September 30, 2026. For sole proprietors, the 2026 tax year (filed in March 2027) is the last; for corporations, through the fiscal year that includes September 30, 2026.
What happens to my consumption tax after the 20% special provision ends?
Sole proprietors can use the "30% special provision" (30% of the tax on sales) for the 2027 and 2028 tax years. From the 2029 tax year onward, and for corporations, you choose from general taxation, simplified taxation, or a return to tax-exempt business status.
What is the 30% special provision?
It is a measure limited to sole proprietors, created by the FY2026 tax reform and already enacted and in force. It lets you set the tax payable for the 2027 and 2028 tax years at 30% of the consumption tax on sales (70% of the tax on sales is deducted). No notification is required; you use it by adding a note on your final tax return. Corporations are excluded.
When do I file notification if I switch to simplified taxation?
If you move to simplified taxation from the period after using the 20% or 30% special provision, filing by that period's final tax return deadline is in time. For an individual starting in the 2027 tax year, that is March 31, 2028. You can decide after the year ends and the figures are known. Once chosen, you continue for two years.
Does general taxation mean I have to file an interim return?
You do once the annual consumption tax (national) for the preceding period exceeds ¥480,000. Under general taxation with taxable purchases of 30% of sales, the dividing line is around ¥8.79 million of sales excluding tax. Because the 20% special provision needed ¥30.76 million, some people start paying twice a year the year after they move.
Will the service industry see a heavier burden when the 20% special provision ends?
It tends to increase. The 20% special provision gave an 80% deduction regardless of industry, but simplified taxation for services (Category 5) is a 50% deduction. Individuals can insert the 30% special provision (70% deduction) in between, but the tax payable ultimately rises in many cases, so an early estimate is recommended.
Reference links (sources)
This article is based on the following materials published by the National Tax Agency and the Ministry of Finance (neutral, primary sources). Because the system, deadlines, and reform content change, please confirm the latest information before filing.
- National Tax Agency — Overview of the 20% special provision (burden-easing measure for small businesses) (in Japanese)
- National Tax Agency — Review of the invoice system under the FY2026 tax reform (in Japanese)
- National Tax Agency — No.6505 The simplified taxation regime (in Japanese)
- National Tax Agency — No.6509 Business categories of the simplified taxation regime (deemed purchase rates) (in Japanese)
- National Tax Agency — The FY2026 tax reform and the invoice system (in Japanese)
- National Tax Agency — Invoice Q&A No.114-2 (the 30% special provision) (in Japanese)
- National Tax Agency — Invoice Q&A No.115-2 (periods where the 30% provision cannot be used) (in Japanese)
- National Tax Agency — Invoice Q&A No.117 (choosing simplified taxation after the 20% or 30% provision) (in Japanese)
- National Tax Agency — Invoice Q&A No.117-3 (the 30% provision vs. simplified taxation; the two-year rule) (in Japanese)
- National Tax Agency — No.6137 Taxable period (in Japanese)
- National Tax Agency — No.6609 How to file an interim return (in Japanese)
- National Tax Agency — The two-year 1% consumption tax rate on food and drink (in Japanese)
- Ministry of Finance — Outline of the FY2026 tax reform (in Japanese)
- National Tax Agency — Procedure to cancel registration as a qualified invoice issuer (in Japanese)
* This article is general information, not tax advice. Which calculation method is advantageous, and whether and by when a notification is required, change with your business circumstances. For specific decisions, please consult a tax office or a tax accountant.
