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. To answer the worry, "Will my consumption tax suddenly jump once it ends?", this article organizes — with primary information from the National Tax Agency — the timing of the end, the newly created 30% special provision, and how to choose among general taxation / simplified taxation / a return to tax-exempt status, together with simulations by industry.
・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), newly created by the FY2026 tax reform.
・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 is a measure for sole proprietors created by the FY2026 tax reform. Check the latest National Tax Agency information for the requirements (became a taxable business because of the invoice system, taxable sales of ¥10 million or less in the base period, etc.) and the details[National Tax Agency FY2026 reform].
[30% special provision] Individuals also get burden relief for the 2027 and 2028 tax years (new)
Because some people would see a sharp jump in their burden if they went straight to the normal calculation after the 20% special provision ends, a "30% special provision" limited to sole proprietors has been newly established.
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. The target is the same small-scale sole proprietors as the 20% special provision (people who became taxable businesses because of the invoice system, etc.). The deduction ratio drops slightly from 80% to 70%, but it is gentler than going straight to the general or simplified method.
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
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 time being (the 2027 and 2028 tax years), sole proprietors can also choose the 30% special provision. 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.
Simulation by industry (example: service business)
Taking a service business (Category 5) whose consumption tax on sales is ¥800,000 (roughly a sales scale of ¥11 million) as an example, we compare how the tax payable changes by calculation method.
* For the same sales, the amount rises step by step: 20% special provision ¥160,000 → 30% special provision ¥240,000 → simplified taxation ¥400,000 (for a service business). General taxation depends on your actual purchases and expenses, and in years with large capital investment it can be more advantageous than the simplified method. For the specific calculations of the three methods, see also How much consumption tax? Calculating with the general, simplified, and 20% special methods.
If you choose simplified taxation, watch the "notification deadline"
As a rule, to use simplified taxation you must file a "Notification of Selection of the Simplified Consumption Tax Regime" by the end of the year before the year you want to apply it[National Tax Agency No.6505]. For an individual, if you want simplified taxation from the 2027 tax year, you file by December 31, 2026.
Simplified taxation requires taxable sales of ¥50 million or less in the base period, and once you start applying it you cannot, in principle, return to the general method for 2 years. Note that when someone who had been applying the 20% special provision chooses simplified taxation after it ends, there is a special rule on the notification timing (in some cases filing during the following taxable period is in time)[National Tax Agency Q&A]. To be safe, check with a tax office or tax accountant how it applies to your own tax year. The difference between the simplified and general methods is explained in The difference between simplified and general taxation.
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.
- Impact on customers: if you return to tax-exempt status you can no longer issue invoices, and your customers (buyers) become unable to claim the input tax credit. Note that buyers have a transitional measure allowing them to deduct a certain proportion of purchases from tax-exempt businesses, and that proportion is reduced from 80% to 70% from October 2026 (and reduced further thereafter). This may lead to requests for price cuts and the like.
* 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, newly created by the FY2026 tax reform, that 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.
When do I file notification if I switch to simplified taxation?
As a rule, you submit the Notification of Selection of the Simplified Taxation Regime by December 31 of the year before the year you want to apply it (the condition is taxable sales of ¥50 million or less two years prior). People who had been using the 20% special provision may have a special rule on the notification deadline. Once chosen, you continue for 2 years in principle.
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 (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 — Invoice Q&A (choosing simplified taxation after the 20% special provision) (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.