How vat / sales tax works in Japan
Japanese consumption tax (shohizei) runs at 10% on most domestic supplies, combining 7.8% national and 2.2% local tax, with an 8% reduced rate on food, non-alcoholic drinks, and qualifying newspapers.
Since October 2023 the qualified-invoice system conditions input credits on holding a compliant invoice from a registered issuer, which pushed many small suppliers into registration.
Businesses file annual returns with interim prepayments at scale, while non-resident platforms and vendors face specified-digital-service and import collection duties.
Tax rates at a glance
- Standard rate
- 10%
- Reduced rate
- 8%
- Food and drink
- 8%
- Exports
- 0%
- Registration threshold
- JPY 10 million
- Platform digital supplies
- 10%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
E-commerce sellersSaaS foundersFreelancersExpatsCross-border traders
Watch out for
- Eat-in versus takeaway splits food taxation: the same meal is 10% at the table and 8% to go, which forces dual-rate POS configuration for food businesses.
- Without a qualified invoice from a registered issuer, buyers lose input credits entirely, so supplier registration status is now a procurement question.
- The JPY 10 million base-period test looks back two years, which means fast-growing startups cross into liability just as cash flow tightens.
- Simplified and deemed-rate schemes suit eligible small traders but forfeit exact input recovery in investment-heavy years.
Frequently asked questions
What is the consumption tax rate in Japan?
Japan applies 10% standard consumption tax in 2026, with an 8% reduced rate on food, non-alcoholic drinks, and qualifying newspapers. Exports are zero-rated.
What is the Japanese invoice system?
Since October 2023, buyers need a qualified invoice from a registered issuer to claim input credits. Unregistered suppliers cannot issue one, which pushes B2B vendors into registration.
When must a Japanese business register?
Past JPY 10 million of taxable sales in the base period two years earlier. Voluntary registration suits input-heavy starters that want credits before crossing the line.