Overview

Suppose a tax-exempt business entity becomes a taxable business entity by obtaining an invoice registration number. In that case, a special exception exists to reduce its tax and administrative burdens. This is an exceptional measure that allows the business concerned to pay only 20% of its sales tax amount for three years after transitioning to the invoice system.

Applicable period

The applicable period is from the taxable period that includes October 1, 2023, to the taxable period that includes September 30, 2026.

For example, if a tax-exempt business with a December fiscal year-end enrolls in the invoice system on October 1, 2023, the exceptional measure will apply to a total of four tax returns, from tax returns for 2023 (only for October through December) to tax returns for 2026 (January through December).

For tax-exempt businesses with a fiscal year ending in March, four tax returns from the fiscal year ending March 2024 (October through March only) through the fiscal year ending March 2027 are eligible for the exceptional measure.

Applicable Persons

If a tax-exempt business operator registers as an invoice-issuing business operator and becomes a taxable business operator from the registration date, it is an applicable person.

(Cases in which a tax-exempt business operator has submitted a taxable business operator election notification are omitted here.)

Therefore, in the following cases, etc.   

– The corporation’s taxable sales for the base period exceed 10 million yen

– A newly established corporation with a capital of 10 million yen or more

The corporation is already a taxable enterprise, so it is not eligible for this special exception.

(Also, if the taxable period is shortened to 1 or 3 months, this special exception does not apply.)

If taxable sales for the taxable period (2) below (2024) exceed 10 million yen, the 20% special exception cannot be applied for the 2026 taxable period.

Calculation method of the amount of tax

Sales tax amount – Sales tax amount x 80% = Amount of tax due

Procedures for receiving the special exception.

The special exception will be applied by simply stating in the space on the tax return that you wish to receive the special exception. No prior notification is required.

Special Provisions for Application of the Simplified Taxation System

In principle, when an application of the simplified taxation system is submitted, the simplified taxation system is applied from the taxable period following the period in which the application is submitted, not from the taxable period in which the application is submitted.

However, if an application of the simplified taxation system is submitted during the taxable period following the taxable period to which 20% special provision is applied, the simplified taxation system can be applied from the taxable period in which the application is submitted.

Example: If a business with a December 31 year-end applies the 20% special exception to its 2026 tax return and submits an application of the simplified taxation system during the following taxable period (by December 31, 2027), the simplified taxation system can be applied to the 2027 tax return.

Election with the Simplified Taxation System

Even if a tax-exempt business has also submitted an application for a simplified taxation system, it is possible to elect the 20% special exception. There is no need to withdraw the Application for Simplified Taxation.