What is the refundable tax credit of "¥40,000 per person"? Differences from the fixed-amount tax cut, who is covered, and when it starts
In June 2026, while the government and the ruling and opposition parties were discussing the introduction of a "refundable tax credit," reports pointed to ¥40,000 per person as the leading proposal. This article organised that debate as it stood at the time. The thinking behind the mechanism (why a tax credit is combined with a benefit, and how it differs from the fixed-amount tax cut) still holds. However, the name of the scheme, the amounts and the timing were all changed by the later Cabinet decisions. Please read it together with the box above, "What was decided as of September 2026."
After this article was written, the scheme moved from "under discussion" to "decided." The basic policy of August 5, 2026 and the outline of September 15, 2026 (both Cabinet decisions) settled the following[Cabinet Secretariat (in Japanese)][Ruling-party outline (in Japanese)].
- The official name of the scheme is the employment burden relief benefit (shugyosha futan keigen shienkin). The refundable tax credit is now positioned as its future form
- Full introduction is in fiscal 2029 (Reiwa 11)
- As a bridge, the consumption tax rate on food and drink is cut to 1% from April 1, 2027 to March 31, 2029
- The national government bears at least two-thirds of the cost of the benefit; the rest is split evenly between prefectures and municipalities
- The benefit amounts and the income thresholds will be set in the FY2027 budget process — so the "¥40,000 per person" in this article was the original proposal, not a decided figure
The details after the decision are organised in our article What is the refundable tax credit? A simulation by income.
What is a refundable tax credit? (the basic mechanism)
A refundable tax credit is a mechanism that combines a "deduction from taxes" with a "cash benefit." A certain amount is subtracted from income tax (a tax credit), and for people whose tax is too small to fully absorb the credit, the difference is paid out in cash. This means that even low-income people who pay little tax can receive the full support — that is the distinctive feature.
With a pure tax credit alone, people who pay little tax cannot absorb it fully and receive less benefit. Supplementing that with a cash benefit is what "refundable" means. Similar systems exist overseas (such as the Earned Income Tax Credit in the United States), and the design is being discussed with reference to them.
How is it different from the fixed-amount tax cut?
It is often confused with the "fixed-amount tax cut" implemented in 2024, but the way it reaches low-income earners differs greatly.
Fixed-amount tax cut (2024)
・People who cannot fully absorb it end there (supplemented separately by an "adjustment benefit")
・A temporary measure
・Pointed out as complex and hard to understand
Refundable tax credit (proposal)
・Low-income earners can receive the full amount too
・Aims to be a permanent system
・Designed so support reaches people according to income
The fixed-amount tax cut only "subtracts from taxes," so the less tax a person paid, the smaller the benefit. A refundable tax credit "pays out the portion that cannot be subtracted," so its biggest difference is that it more readily reaches precisely the low-income people.
How much will you get? The original "¥40,000 per person" proposal
Under the original proposal, ¥40,000 per person was reported as the leading figure. It was said to be based on the idea that "the annual consumption tax burden on food and the like is about ¥40,000 per person"[explanatory article]. That proposal did not become the scheme as it stands. The outline of September 15 caps the total cost of the benefit paid during the two bridging years at "the range of 1% of the consumption tax on food and drink," and states that the amount per person will be set in the FY2027 budget process[Cabinet Secretariat (in Japanese)].
Because it was "per person," a design in which the number of family members is covered was assumed.
A household of four with 2 adults + 2 children: ¥40,000 × 4 people = ¥160,000 (a rough estimate at the time, based on the original proposal)
* This is the proposal as of June 2026. Under the decided scheme, the flat support amount, the basic support amount and the child add-on are all still without figures.
Who is covered?
Coverage was being discussed centered on the middle- and low-income working generation, in a direction that also includes people who are holding back their way of working because they face the "income wall"[Nikkei]. The basic policy of August 5, 2026 then settled that the benefit is paid on an individual basis and that single people are covered too[Cabinet Secretariat, basic policy (in Japanese)]. The income thresholds, however, remain undecided.
| Position | Direction of coverage (outlook as of June 2026) |
|---|---|
| Employees / part-timers | In the direction of covering the middle- and low-income bracket. Discussion also includes people holding back their way of working due to the income wall |
| Sole proprietors / freelancers | In the direction of including them as the working middle- and low-income bracket |
| Pensioners (working elderly) | In the direction of also covering middle- and low-income elderly people with earned income |
| Residence-tax-exempt households | A design covering them through a cash benefit is being considered |
| High-income bracket | An income ceiling excluding them is expected to be set (the level is undecided) |
* The unit of payment has been settled as the individual (single people included). The income thresholds are still undecided.
When does it start? The schedule as decided
- May–June 2026 (when this article was written) In working-level talks between the ruling and opposition parties, there was broad agreement on a direction to "shelve the tax credit for the time being and start with the benefit first." An interim summary in June.
- August 5, 2026 The Cabinet approved the basic policy for introducing the refundable tax credit. Full introduction in fiscal 2029, paid on an individual basis with single people covered.
- September 15, 2026 (now) The Cabinet approved the outline on the temporary reduction of the consumption tax on food and drink and the introduction of the employment burden relief benefit, fixing the name of the scheme as the employment burden relief benefit.
- April 1, 2027 – March 31, 2029 As a bridge, the consumption tax on food and drink is cut to 1%, with the benefit paid alongside it.
- Fiscal 2029 Full introduction of the benefit. The amounts and the income thresholds will be set in the FY2027 budget process.
Because a refundable tax credit takes time to design and prepare, a proposal to first implement a consumption tax cut on food and drink as a "bridge" was being discussed. The outline of September 15 settled it: a rate of 1% for two years from April 1, 2027 (newspaper subscriptions published at least twice a week are excluded). For the overall 2026 reform, please also see the 2026 Tax Reform Summary.
How do you receive it? (the method of execution)
How you receive it is also at the examination stage, but the following directions have been indicated.
The system is not yet finalized, but registering a public-fund receiving account with My Number has been the premise for "automatic transfer" in past benefits too. Registering it may make future benefits smoother (registration is optional).
Common misunderstandings
The ¥40,000 was the original proposal as of June 2026, and it did not become the scheme as it stands. The scheme itself (the employment burden relief benefit) has been decided, but how much each person receives is still undecided and will be set in the FY2027 budget process. Be careful of information claiming "decided" or "applications open," and always confirm with official announcements.
The fixed-amount tax cut only subtracted from taxes, and had the weakness of not readily reaching low-income earners who could not fully absorb it. The refundable tax credit differs fundamentally in that it supplements this with a cash benefit.
Summary
FAQ
When does the refundable tax credit start?
The basic policy of August 5, 2026 and the outline of September 15 settled that full introduction is in fiscal 2029. As a bridge, the consumption tax rate on food and drink is cut to 1% from April 1, 2027 to March 31, 2029, with the benefit paid alongside it.
How much will you get?
¥40,000 per person was originally reported as the leading proposal. However, the amount under the decided scheme (the employment burden relief benefit) is still undecided and will be set in the FY2027 budget process. The total for the two bridging years is capped at “the range of 1% of the consumption tax on food and drink.”
How is it different from the fixed-amount tax cut?
The fixed-amount tax cut only subtracts a fixed amount from taxes, so people who pay little tax could not fully absorb it and received less benefit. The refundable tax credit pays out the portion that cannot be fully absorbed as a cash benefit, so it differs in that low-income people can also receive the full amount.
Who is covered?
Coverage centres on the middle- and low-income working generation, including people facing the income wall. The basic policy of August 5, 2026 settled that the benefit is paid on an individual basis and covers single people too. The income thresholds, however, remain undecided.
Are any procedures needed to receive it?
Under the outline, municipalities certify claims and pay the benefit once a year. If you have registered a public-fund receiving account, the mayor may certify and pay it ex officio, without a claim.
Reference links (sources)
This article was prepared as of June 2026 based on information from the following public bodies and news reports, and the decided items were added on September 23, 2026. Because some parts (such as the amounts) are still undecided, please check official announcements for the latest and confirmed information.
- Cabinet Secretariat — "The reduction of the consumption tax rate on food and drink" and "the refundable tax credit" (primary source for the basic policy and the outline) (in Japanese)
- Liberal Democratic Party — Outline on the temporary reduction of the consumption tax on food and drink and the introduction of the employment burden relief benefit (September 15, 2026) (in Japanese)
- Cabinet Secretariat — National Conference on an All-Generation Social Security / Population Strategy (materials examining the refundable tax credit) (in Japanese)
- Nikkei — Refundable tax credit: government and ruling/opposition parties aim to design it at the National Conference (in Japanese)
- Refundable tax credit 2026: benefit first, income wall also covered (taxlabor.com) (in Japanese)
- The basis of the "¥40,000 per person proposal" and the difference from the fixed-amount tax cut (taxlabor.com) (in Japanese)
- The refundable tax credit: so how much, and who is covered? (MONEYIZM) (in Japanese)
* This article is intended to provide general information and is not tax or system advice. The benefit amounts and income thresholds will be set in the FY2027 budget process, so the content may change. For the latest and confirmed information, please check the official announcements of the Cabinet Secretariat, the Ministry of Finance, and each ministry and agency.
