Invoice System

The core of the Invoice System is the tightening of requirements for consumption tax input credits. Previously, input tax credits were allowed with the preservation of ledgers and invoices, but under the Invoice System, preservation of "qualified invoices" is mandatory. Qualified invoices require entries not found on conventional invoices, including registration numbers, applicable tax rates, and consumption tax amounts by tax rate.

The greatest impact falls on tax-exempt businesses with annual sales of 10 million yen or less. Since tax-exempt businesses cannot issue qualified invoices, their trading partners cannot claim input tax credits. As a result, they face risks of price reduction demands or termination of business relationships. One option is to convert to a taxable business and register as a qualified invoice issuer, but this creates a new consumption tax payment obligation, reducing take-home income. As a transitional measure, a certain percentage of credits from purchases from tax-exempt businesses is allowed until September 2029, but this is being phased down gradually.

For freelancers and small-scale businesses to respond to the Invoice System, the first step is understanding the situation of their trading partners. If trading partners are consumption tax-paying businesses that need input tax credits, registration as a qualified invoice issuer should be considered. On the other hand, if trading partners are primarily consumers (BtoC) or tax-exempt businesses, the impact of not registering is limited.

When converting to a taxable business, the "20% Special Rule" (simplified taxation special provision) can limit the tax payment to 20% of the sales tax amount. This special provision is applicable through the taxable period containing September 2026. Additionally, by choosing the simplified taxation system, input tax credits can be calculated using "deemed purchase ratios" set by industry, eliminating the need to preserve invoices for actual purchases. Most accounting software provides invoice-compliant invoice templates, so issuing qualified invoices is possible simply by configuring the registration number. Since system details are frequently updated, it is important to verify the latest information through the National Tax Agency's official website or consultation with a tax accountant.