The "special rule to fully expense small depreciable assets" for small and medium-sized enterprises (SMEs) has been expanded from "under ¥300,000" to "under ¥400,000" for assets acquired from April 2026 (Reiwa 8). This means you can treat equipment and computers with an acquisition cost of under ¥400,000 as a full expense in the year of purchase (immediate expensing) (up to a combined total of ¥3 million per year). We organize, based on primary sources, who can use it and from when, along with the common question: "What happens to an asset worth ¥300,000–¥400,000 that I am already depreciating?"
Key points of the 2026 reform
Under the special rule to fully expense small depreciable assets for SMEs, the eligible acquisition cost has been raised from under ¥300,000 to under ¥400,000, and the application deadline has also been extended by three years[Small and Medium Enterprise Agency (in Japanese)].
| Item | Details |
|---|---|
| Eligible acquisition cost | under ¥300,000 → under ¥400,000 |
| Effective date | Assets acquired and put into business use on or after April 1, 2026 (Reiwa 8) |
| Application deadline | Extended by three years, until March 31, 2029 (Reiwa 11) |
| Annual cap | Up to a total of ¥3 million (unchanged) |
| Eligible parties | SMEs, etc. that file a blue return (corporations with capital of ¥100 million or less, and sole proprietors) |
| Employee requirement | Number of regular employees narrowed from 500 or fewer → 400 or fewer |
* Note that the eligibility requirements have become somewhat stricter. Businesses with more than 400 but 500 or fewer employees are excluded from eligibility under this reform.
What is the "special rule to fully expense small depreciable assets"?
Equipment and machinery costing ¥100,000 or more cannot, in principle, be fully expensed in that year; instead you expense them in installments over their useful life (depreciation). However, SMEs filing a blue return can, under a special rule, fully expense assets below a certain amount in the year of acquisition[National Tax Agency No.5408]. The differences in accounting treatment by acquisition cost are as follows.
| Acquisition cost | Accounting treatment | Depreciable asset tax |
|---|---|---|
| Under ¥100,000 | Full expense in that year (e.g., as supplies) | Not charged |
| ¥100,000 or more but under ¥200,000 | Lump-sum depreciable asset (equal depreciation over 3 years) | Not charged |
| ¥100,000 or more but under ¥400,000 (blue-return SMEs, etc.) | Special rule for small depreciable assets: full expense (up to ¥3 million/year) | Charged |
| ¥400,000 or more | Ordinary depreciation (in installments over the useful life) | Charged |
* For ¥100,000 or more but under ¥200,000, you may choose either a lump-sum depreciable asset (equal over 3 years) or the small-asset special rule. The basic way to use them is: the small-asset special rule if you want to expense the full amount right away, or a lump-sum depreciable asset if you want to hold down the depreciable asset tax burden.
- Without the special rule: with a 4-year useful life and the straight-line method, the first-year expense is ¥360,000 × 0.25 = ¥90,000 (further prorated by the number of months of use). The rest is spread over subsequent years.
- With the special rule: you can expense the full ¥360,000 in that year. This is a price range that was ineligible before the reform (under ¥300,000).
- Since the annual allowance is ¥3 million in total, you could fully expense up to 8 units (¥2.88 million) of the same ¥360,000 computer.
Because you can put it into expenses in that year without spreading it out, it is effective for tax saving in a profitable year. For the mechanism of depreciation itself, see Basics of depreciation.
From when? The test is "the time of acquisition and business use"
Under ¥400,000 can be used for assets acquired and put into business use on or after April 1, 2026 (Reiwa 8). The threshold splits at the timing of acquisition (of business use).
| Timing of acquisition / business use | Eligible acquisition cost |
|---|---|
| Through March 31, 2026 | Up to under ¥300,000 |
| On or after April 1, 2026 | Up to under ¥400,000 |
* Not only "acquiring" it, but also actually starting to use it in your business (business use) is a requirement. If you are planning an asset of ¥300,000–¥400,000, starting acquisition and use on or after April 1, 2026 makes it eligible for the special rule.
What happens to a ¥300,000–¥400,000 asset "already being depreciated"?
This is the most common question. To state the conclusion first, you cannot retroactively expense it in a lump sum.
Whether you can use the special rule is determined by the test "at the time of acquisition and business use." For example, if you bought a ¥350,000 computer in 2025 and are depreciating it, the threshold at that time was "under ¥300,000," so it was ineligible for the special rule and you chose ordinary depreciation. Even though the threshold rises to under ¥400,000 in April 2026, you cannot retroactively expense this asset in a lump sum. You continue depreciating it over its original useful life. The new under-¥400,000 threshold can only be used for assets acquired and put into business use on or after April 1, 2026.
If you are planning to buy equipment or a computer costing ¥300,000–¥400,000, making the acquisition and start of use on or after April 1, 2026 lets you expense it in a lump sum under the new special rule. If you rush to buy before March, it is judged under the old threshold (under ¥300,000), and items of ¥300,000 or more but under ¥400,000 fall under ordinary depreciation.
Points to note when using it
- A blue return is a requirement (it cannot be used with a white return). Also check the differences in blue returns and white returns.
- Up to a combined total of ¥3 million per year. Assets in excess of this fall under ordinary depreciation (for a corporation whose fiscal year is less than one year, the cap is ¥3 million prorated by the number of months).
- When filing, attaching or entering a schedule is required. Corporations attach a schedule (Appended Table 16(7)) to the return; sole proprietors do so by, for example, entering "Article 28-2 of the Act on Special Measures Concerning Taxation" in the depreciation calculation field of the blue-return financial statement[National Tax Agency No.5408].
- Assets lent out other than in your main business are ineligible (Reiwa 4 reform).
- Depreciable asset tax (fixed asset tax) applies. Even if you expense the asset in a lump sum for income tax or corporate tax, that asset is subject to fixed asset tax as a depreciable asset (assets under ¥100,000 and lump-sum depreciable assets are exempt). See also Calculating fixed asset tax.
- For journal entries, there are methods such as recording the asset at acquisition and transferring the full amount to depreciation expense at year-end closing (Basics of account titles and journal entries).
FAQ
From when does the special rule for small depreciable assets become "under ¥400,000"?
From assets acquired and put into business use on or after April 1, 2026 (Reiwa 8), the eligible amount expands to under ¥400,000. For those acquired through March 31, 2026, under ¥300,000 remains the target as before. The application deadline has been extended by three years, until March 31, 2029 (Reiwa 11).
Can I retroactively expense in a lump sum a ¥300,000–¥400,000 asset bought by March 2026 that is being depreciated?
No. The test for the special rule is determined by the threshold at the time of acquisition and business use. An asset for which the threshold at acquisition was under ¥300,000 is ineligible, and you continue ordinary depreciation. The under-¥400,000 threshold applies only to assets acquired on or after April 1, 2026.
Can sole proprietors use it too?
Yes. Any SME with 400 or fewer regular employees that files a blue return is eligible, whether an individual or a corporation. It cannot be used with a white return.
What happens if I exceed ¥3 million a year?
Assets in excess of the ¥3 million allowance are processed not under this special rule but under ordinary depreciation (or the lump-sum depreciable asset system). The allowance is up to ¥3 million per fiscal year (for individuals, per calendar year).
If I expense it in a lump sum, does that mean no depreciable asset tax either?
No, it still applies. An asset expensed in a lump sum under this special rule is also subject to the local depreciable asset tax (fixed asset tax). What is exempt from depreciable asset tax are assets under ¥100,000 and lump-sum depreciable assets (equal over 3 years).
Summary
Reference links (sources)
This article is based on the following official materials (neutral, primary sources). Because systems and special rules are revised, please check the latest content before filing.
- National Tax Agency No.5408 Special rule for including in deductible expenses the acquisition cost of small depreciable assets of SMEs, etc. (in Japanese) (* Depending on when Tax Answer is updated, it may still show the pre-reform figure [under ¥300,000])
- Small and Medium Enterprise Agency — Special rule for small depreciable assets (in Japanese) / Pamphlet "We have expanded the special rule for small depreciable assets" (PDF) (in Japanese)
- Ministry of Finance — Outline of the Reiwa 8 tax reform (in Japanese)
- National Tax Agency No.2100 Overview of depreciation (in Japanese)
* This article is general information, not tax advice. For individual judgments, please confirm with a tax office or a tax accountant.