For foreign nationals working freelance in Japan, the qualified invoice system is an unavoidable question.
Register or stay exempt?
As a starting point, if your taxable sales in the base period (the year before last) were ¥10 million or less, you can remain exempt from consumption tax. But only registered taxable businesses can issue qualified invoices. If your clients are mainly companies, being unregistered means they cannot, as a rule, take the purchase tax credit for the consumption tax element of what they pay you — which can affect your terms and rates.
The basic axis of the decision is this: (i) if your customers are businesses (B2B), the pressure to register is strong; (ii) if your customers are consumers (B2C), staying exempt usually causes little difficulty.
The 20% special rule ends in 2026
As transitional relief for businesses that register, the "20% special rule" (tax payable set at 20% of the consumption tax on sales) has been available. Under the 2026 tax reform, however, it ends with the taxable period that includes 30 September 2026. For sole proprietors, the return for 2026 is the last to which it applies.
The new 30% rule for sole proprietors
As its successor, a "30% special rule" has been created for sole proprietors only. For taxable periods in which a formerly exempt business becomes taxable through invoice registration or by election, the returns for 2027 and 2028 may set the tax payable at 30% of the consumption tax on the tax base (to apply it, you note the election on your final return). It is not available from the 2029 return onward, so a move to the simplified taxation system (deemed purchase ratio of 50% for service businesses, and so on) then comes into view. On this point, for the taxable period following one in which the 20% or 30% rule was used, a special rule allows simplified taxation to apply from that following period if the election form is filed by its filing deadline. (See our note: What Is the Blue Return?.)
The buyer-side transitional credit
On the buyer’s side, transitional relief allows a business buying from unregistered, exempt suppliers to credit a fixed portion of the consumption tax element in the price. The 2026 reform extends this relief by two years and revises the percentages: 80% through 30 September 2026; 70% from 1 October 2026 to 30 September 2028; 50% from 1 October 2028 to 30 September 2030; 30% from 1 October 2030 to 30 September 2031; and nothing thereafter. In addition, where purchases from the same supplier exceed ¥100 million in a year (business year), the relief does not apply to the excess (for taxable periods beginning on or after 1 October 2026).
Even if you stay unregistered, the buyer-side credit shrinks on this schedule, so requests from clients to register can be expected to continue. The registration decision should be made against this timetable and your own sales mix.
Services supplied to overseas customers
Finally, services supplied to overseas customers may, depending on their nature, qualify as export-exempt or fall outside Japanese consumption tax altogether as foreign transactions — an analysis different from domestic sales, and one specific to cross-border freelancing. Check the composition of your sales before deciding whether to register.
Deciding whether to register?
We advise freelancers on invoice registration and prepare consumption tax returns — by email.
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