Japan’s 20% and 30% Special Rules and the 80%→70% Transitional Measure: Deadlines Explained

The invoice system has two separate transitional measures. One is the 20% and 30% special rules, which lower a seller’s tax payable when an exempt business registers. The other is the transitional measure that lets a buyer credit part of the input tax on purchases from exempt businesses and similar sellers^[5]. They end in different ways. The seller’s rules follow the taxable period; the buyer’s percentage follows the purchase date.

The special rules in the table are open only to businesses that meet the conditions. "Not available" means the rule cannot be used, not that no return is needed. The conditions are in the next two sections.

The 20% special rule (2割特例) sets tax payable at 20% of the tax on sales: the tax on sales minus a special deduction equal to 80% of it. It applies when an exempt business becomes a qualified invoice issuer (適格請求書発行事業者) in any taxable period that contains a day from October 1, 2023 to September 30, 2026. That includes an exempt business that became taxable by filing an election for taxable status (課税選択届出書)^[1].

The cutoff is "the taxable period that contains September 30, 2026". Whether you can use it depends on whether the taxable period contains September 30, 2026, not on whether the period has ended or the return has been filed. A sole proprietor’s taxable period runs January 1 to December 31, so 2026 is the last year and the rule can still be used. The return for 2026 is due March 31, 2027^[3][11].

A company’s taxable period is its business year. The business year that contains September 30, 2026 is the last^[3]. Besides a December year-end, the NTA shows a March year-end example (the 20% rule through the year ending March 2027)^[3][12]. The June and September rows below are our own application of the NTA’s general wording (「令和8年9月30日の属する課税期間」, the taxable period containing September 30, 2026).

In the table, "last business year" means you can use the 20% rule through that year’s return. If the year has ended but the return is not yet filed, you can still note it on the return. You lose it from the business year after that^[3][11].

Even inside the period, some taxable periods are excluded^[2].

• A period whose base period (基準期間) taxable sales exceed ¥10 million. This is tested period by period.
• A period in which the specified-period (特定期間) rule limits the exemption threshold.
• Certain periods involving inheritance, merger or split, or a newly formed company.
• Periods in which the exemption threshold is restricted because a high-value asset was purchased.
• A period under the special taxable-period election.
• A period of a foreign business with no permanent establishment (PE) in Japan on the first day (see the box below).

A business that was already taxable and then registered can also use the rule from the period after the one in which it registered, in principle, if base-period taxable sales are ¥10 million or less. The cutoff is still the period containing September 30, 2026^[1].

No advance notice is needed. You add a note to the return that you are applying the 20% rule. A business that has filed a simplified-method election form can still file under the 20% rule^[1][14][15].

The 30% special rule (3割特例) sets tax payable at 30% of the tax on sales. It was created by the fiscal 2026 (令和8年度) tax reform. It applies when an exempt business that is a sole proprietor becomes a qualified invoice issuer in a taxable period in 2027 or 2028. That includes an exempt business that became taxable by filing an election for taxable status^[4][5].

There are three conditions^[5].

• You are a sole proprietor.
• Taxable sales in the base period (two years before the year you apply) are ¥10 million or less. For 2027 the test uses 2025 sales; for 2028 it uses 2026 sales.
• You are registered as a qualified invoice issuer.

The periods where it cannot be used are nearly the same as for the 20% rule: a foreign business with no PE, a period where base-period taxable sales exceed ¥10 million, a period where the specified-period rule limits the exemption threshold, and so on^[16]. You apply the same way, by noting it on the return^[4].

A sole proprietor that was already taxable and then registered can also use the 30% rule from the period after the one in which it registered, in principle, if base-period taxable sales are ¥10 million or less. It still covers only 2027 and 2028^[4].

A company cannot use the 30% rule. From the business year after the one containing September 30, 2026, a company cannot use the 20% or the 30% rule and files under the general or simplified method^[3][12].

From April 1, 2028, the consideration for specified small-amount assets (特定少額資産) is removed from the taxable amount used in the 30% calculation. This page does not cover what counts as a specified small-amount asset. If your sales may include such assets, check with the tax office or a tax accountant^[4].

After registering, you calculate tax payable under the 20% or 30% rule, the simplified method, or the general method. The simplified method (簡易課税) treats the tax on sales multiplied by a deemed purchase rate (みなし仕入率) as the input tax. It is open only to periods where base-period taxable sales are ¥50 million or less, and once chosen it normally applies for two years^[6][5]. The deemed purchase rate depends on the business category.

The example compares two fictional sole proprietors. Each has ¥8 million in taxable sales excluding tax (all at 10%), so the tax on sales is ¥800,000. Assume base-period taxable sales are ¥10 million or less. To keep the arithmetic simple, the example does not split consumption tax and local consumption tax and just multiplies the tax on sales by each rate. For a real return, follow the return form. All amounts are made up, and the tax rate is the current 10%. Under a government plan (not law as of October 22, 2026; it applies only if the bill passes), the rate on food and beverages would be cut to 1% from April 1, 2027 to March 31, 2029, with special calculation rules for food sellers under the simplified method and the 30% rule^[17]. This example does not include it.

• Retail: the 80% deemed rate equals the 20% rule’s deduction (80% of the tax on sales), so tax payable is the same as under the 20% rule, and lower than under the 30% rule.
• Services: the deemed rate is 50%, so tax payable under the simplified method is higher than under both the 20% and 30% rules.
• Heavy purchasers: with large actual input tax, the general method can be lowest.
• NTA examples: Q&A 117-2 says the simplified method should give lower tax than the 20% rule for a wholesale company (90%), and Q&A 117-3 says the same against the 30% rule for a retail sole proprietor (80%)^[7][8].
• Refunds: if big capital spending makes the tax on purchases exceed the tax on sales, the general method produces a refund. The simplified method and the 20% and 30% rules do not normally produce one^[7][8].

Unlike the 20% and 30% rules, the simplified method needs a notification form (届出書). There are three deadlines.

• General rule: by the day before the first day of the taxable period in which you want to use it^[6].
• Using it from the period in which an exempt business registers: if you register in a taxable period containing a day from October 1, 2023 to September 30, 2029 and become taxable from the registration date, filing the form during that period lets you use it from that period^[6]. For a calendar-year sole proprietor that is December 31; for a company, the last day of the business year containing the registration date. It does not move to the next day if that day is a holiday^[6][7].
• Using it from the period after one in which you used the 20% or 30% rule: filing by the return deadline for that next period is enough. If that next period ends on or before September 30, 2026, the deadline is during that period. If the return deadline falls on a holiday it moves to the next day, and if a company’s deadline is extended, the extended date applies^[11].

The NTA gives these examples of the third case. A sole proprietor who used the 20% rule through 2025 and wants the simplified method from 2026 must file by the 2026 return deadline (March 31, 2027). A sole proprietor who used the 30% rule through 2028 and wants the simplified method from 2029 must file by the 2029 return deadline (April 1, 2030). A December year-end company that wants the simplified method from the year ending December 2027 must file by that year’s return deadline (February 29, 2028)^[11][3].

To claim an input tax credit (仕入税額控除), a buyer must in principle keep a qualified invoice or similar document^[18]. If the supplier is tax-exempt or not registered, its invoice is not a qualified invoice. A buyer filing under the general method can still credit a set percentage of the input tax if it meets certain conditions. This is the transitional measure (経過措置)^[9][19].

• Rate: 80% for purchases through September 30, 2026, and 70% from October 1, 2026 to September 30, 2028. After that, 50% from October 1, 2028 to September 30, 2030, 30% from October 1, 2030 to September 30, 2031, and no credit from October 1, 2031^[9][18].
• Watch for old schedules: material from before the 2026 reform shows a schedule with 50% from October 2026. The current schedule is the one above^[5].
• Which date counts: the rate follows the time of the purchase, not the payment date or the invoice date. For goods it is the delivery date; for services it is the day all the agreed services are completed. In an NTA example, services provided from September 21 to October 20, 2026 and paid on October 31 get 70%. For goods, delivery from September 21 to 30 gets 80% and delivery from October 1 to 20 gets 70%^[10].
• Cap: in taxable periods starting on or after October 1, 2026, the measure does not apply to the part of purchases from one supplier above ¥100 million, tax included, in a year (business year). For periods that started between October 1, 2024 and September 30, 2026, the cap is ¥1 billion. The rate follows the purchase date; the cap follows when the taxable period started^[9].

An example. A client on the general method buys goods for ¥110,000 including 10% tax from an exempt business, delivered on November 15, 2026. The input tax is 10/110 of ¥110,000, which is ¥10,000. The client can credit 70%, or ¥7,000, and cannot credit the other ¥3,000. Here too, consumption tax and local consumption tax are not split.

Using the measure requires keeping the following^[9].

• Books: a note that the purchase falls under the measure, such as "80% deduction applies" (「80％控除対象」) or 「免」.
• Invoices: the same details as a segmented-entry invoice (区分記載請求書等). Five items: (1) the name of the party that prepared the document, (2) the date of the transaction, (3) the goods or services (marked if reduced-rate), (4) the total price including tax for each tax rate, and (5) the name of the business receiving the document.

If an unregistered seller writes items (1) to (5) on its invoice, the client can meet the invoice requirement. The note in the books is the client’s job. A document without a registration number is treated as a segmented-entry invoice, not a qualified invoice^[19].

This measure concerns the general method, where the buyer calculates input tax from actual purchases. The simplified method gets its deduction by multiplying the tax on sales by the deemed purchase rate, so, on our reading, whether a supplier is registered does not change it^[5]. The 20% and 30% rules also do not calculate actual input tax, so the same logic applies. Both points are our inference from how the rules work, not NTA statements^[1][5]. If you are an exempt business deciding whether to register, find out which method your main clients use.

The small-amount rule (少額特例) is separate. It lets a buyer of a certain size claim an input tax credit on purchases under ¥10,000 including tax by keeping only its books, for purchases through September 30, 2029. The conditions are in Japan’s qualified invoice system^[20].