The Under-10M-Yen Consumption Tax Exemption

Japan consumption tax exempt business status, or 免税事業者 (menzei jigyōsha, "tax-exempt business"), covers sellers at or under 10M yen in base-period taxable sales: no filing, no payment.¹ The rates an exempt seller need not remit are the 10 percent standard and 8 percent reduced pair.² The status is still legal after the invoice launch; only its B2B economics changed.

Confirm current details with official sources

Procedures, fees, and requirements can change. Confirm current details at the National Tax Agency site. This article is general information, not tax advice; for your specific case, consult a licensed tax accountant (zeirishi).

Overview

A business whose 基準期間 (kijun kikan, "base period") and special-period taxable sales both sit at or under 10M yen is exempt from consumption-tax liability.¹ Registration as a qualified invoice issuer defeats the exemption by itself, regardless of sales.¹ The decision that follows is commercial: who buys from you decides whether exemption still pays.

How the 10M threshold works

For a sole proprietor, the base period is the year before last: 2024 sales decide 2026 status.¹³ The special period is January 1 to June 30 of the prior year; both windows must sit at or under 10M yen to hold the exemption.¹

Window (sole proprietor)	Period	Line (as of 2026-09)
Base period	Year before last (2024 decides 2026)	10M yen or less13
Special period	Jan 1 to Jun 30 of prior year	10M yen or less1
Simplified-taxation election	Base period	50M yen or less1

The table as a whole reflects NTA No.6101 current as of 2026-09; confirm current figures with the NTA before relying on a threshold.¹

Crossing 10M yen therefore bills with a two-year lag, not a same-year shock. The status flip is designed delay, which is also why a strong current year never retroactively taxes itself.

Taxable sales means taxable sales, not all income

The 10M line counts taxable sales in the base window, not total receipts. Exempt and non-taxable items sit outside the count, so check the NTA categories before assuming a crossing.¹

What exempt status meant before October 2023

Before the invoice launch, an exempt seller owed no filing and no payment, and contract terms decided whether the 10 percent stayed in the price or was never charged.¹ Clients claimed input credit on exempt-seller purchases under the old retention rules, so the exemption cost the freelancer nothing commercially.³

That past is the source of present confusion. Veterans who built pricing when exemption was invisible now meet clients who price it explicitly. The statute barely moved; the commercial visibility of the status moved enormously.

What changed after the invoice launch

Exemption remains lawful, but B2B buyers generally lose input credit on exempt-seller invoices outside the dated transitional relief.¹⁴ An exempt-to-issuer registrant under the transitional window becomes taxable from the registration date to the period end, not from the next period.³⁴

The chart restates the threshold plus the client-mix fork: the law grants the status, the book decides its price.¹⁴

The two documented strategies: stay exempt or register

A consumer-heavy book can stay exempt: consumers hold no input credit to lose, so the filing cost of registration buys nothing.⁴ Lessons, personal services, and direct retail sit comfortably here.

A corporate-client book faces pressure to register: buyers price the lost credit into fees or move work to issuers.⁴ Softeners exist for those who register. Simplified taxation is electable at or under 50M yen base-period sales, and the 20 percent special measure lets qualifying post-invoice new issuers remit 20 percent of output tax for periods falling October 1, 2023 to September 30, 2028 (as of 2026-09; confirm current figures with the NTA).¹

Price the registration before you file it

Model one year of output tax under the 20 percent measure against the fee premium your B2B clients will pay for a qualified invoice. If the premium covers the bill, register; if the book is consumer-led, keep the exemption.

Good to know

Registration ends the exemption by itself

Issuer status overrides the 10M line from the registration date, whatever the base period shows.¹ There is no dual status: holding a T-number and claiming exemption for the same sales cannot coexist.

The 2-wari tokurei softens the first years

Qualifying new issuers remit 20 percent of output tax inside the October 2023 to September 2028 window (as of 2026-09).¹ The measure trims computation and payment while the practice adjusts, but it does not extend the exemption; the seller is taxable throughout.

Crossing 10M has a two-year lag, not a same-year bill

Because the base period looks two years back, a breakout year schedules future taxable status rather than creating an immediate filing.¹³ Use the lag to elect simplified taxation or to plan invoice registration before clients demand it.

See also

• Client-Side Withholding (Gensen Choshu)
• Side-Business While Employed: What's Allowed
• Health Insurance and Pension for Freelancers
• The Qualified Invoice System for Freelancers: Register or Absorb
• Japan Consumption Tax Rates: The 10 Percent Standard and 8 Percent Reduced Rates

References

Footnotes

1. National Tax Agency. No.6101 消費税の基本的なしくみ (basic mechanism). [令和7年4月1日現在法令等]. 10M business-exemption threshold on base/special periods; registration defeats exemption; simplified taxation at 50M base sales; 2-wari tokurei Oct 1, 2023 to Sep 30, 2028. https://www.nta.go.jp/taxes/shiraberu/taxanswer/shohi/6101.htm ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹ ↩¹² ↩¹³ ↩¹⁴ ↩¹⁵ ↩¹⁶ ↩¹⁷

2. National Tax Agency. Basic knowledge | Consumption Tax (English). Rate table 10%/8% from Oct 1, 2019; payable equals output minus input. https://www.nta.go.jp/english/taxes/consumption_tax/01.htm ↩

3. National Tax Agency. Consumption/Local taxes general guide for sole proprietors (English, 2022 PDF). Base period is two years prior (sole proprietor: calendar year before last); special period Jan 1 to Jun 30 of prior year; exempt-to-issuer mid-period registration mechanics. https://www.nta.go.jp/english/taxes/consumption_tax/pdf/2022/general_02.pdf ↩ ↩² ↩³ ↩⁴ ↩⁵

4. National Tax Agency. Simplified-tax guide (English, 2025 PDF). Exempt-to-issuer lock-in through period containing two years after registration; transitional 80%/50% buyer relief; small-amount standing relief through Sep 30, 2031. https://www.nta.go.jp/english/taxes/consumption_tax/pdf/2025/simplified_02.pdf ↩ ↩² ↩³ ↩⁴ ↩⁵