Published: June 2026 | Updated for the December 2025 tax reform

If you're a freelancer or sole proprietor in Japan, you've probably heard that the 2割特例 (20% special rule) ends on September 30, 2026. What you may not have heard is that the government confirmed a follow-up measure in December 2025: the 3割特例 (30% special rule), available exclusively to individual sole proprietors from October 2026 through September 2028.

Most Japanese tax calculators — including the popular ones — haven't added it yet. Here's everything you need to know.

What's Happening in October 2026

When Japan's qualified invoice system (インボイス制度) launched in October 2023, the government introduced the 2割特例 to ease the transition. Under this rule, newly registered invoice issuers could calculate their consumption tax as just 20% of their sales tax — regardless of actual expenses. For most freelancers, this meant paying far less consumption tax than under any other method.

That cushion disappears on September 30, 2026.

Starting October 1, 2026, the landscape shifts to four possible methods for calculating your consumption tax:

1. 3割特例 (30% Special Rule) — NEW Your consumption tax = 30% of your output tax. Only available to individual sole proprietors (not corporations), and only for tax periods beginning between October 2026 and September 2028. This is the direct successor to the 2割特例, just at a higher rate.

2. 簡易課税 (Simplified Taxation) Your consumption tax = output tax minus a "deemed purchase" deduction based on your industry type. The deemed purchase rate ranges from 40% (real estate) to 90% (wholesale). You must have base-period sales of ¥50 million or less, and you must file an election form (届出書) before the start of the tax period you want it to apply to.

3. 本則課税 (Standard Taxation) Your consumption tax = output tax minus actual input tax on qualified purchases. This is the default method. It requires you to track every purchase and verify that each supplier's invoice is qualified (valid T-number, correct format). More bookkeeping, but potentially lower tax if your expenses are high.

4. 免税 (Tax-exempt status) If your base-period sales are under ¥10 million, you can choose not to register as an invoice issuer and pay no consumption tax. The trade-off: your business clients can't claim input tax credits on payments to you, which means they effectively lose 10% on every transaction. Whether this matters depends entirely on whether you sell to businesses or consumers.

How Much More Will You Pay?

Let's use a concrete example. Say you're a service-industry freelancer (IT consulting, design, translation) with ¥8 million in annual revenue and ¥1.5 million in deductible expenses.

Under the 2割特例 (ending September 2026): - Output tax: approximately ¥727,000 - Your tax: ¥727,000 × 20% = ¥145,000

Under the 3割特例 (October 2026 onward): - Your tax: ¥727,000 × 30% = ¥218,000

Under 簡易課税 (service industry, 50% deemed rate): - Your tax: ¥727,000 × 50% = ¥364,000

Under 本則課税 (with ¥1.5M actual expenses): - Input tax: approximately ¥136,000 - Your tax: ¥727,000 − ¥136,000 = ¥591,000

The difference between the best and worst method for this freelancer is ¥446,000 per year. That's not trivial.

→ Calculate your own numbers with our 4-method optimizer

The Critical Deadline: December 31, 2026

Here's the part that catches people off guard. If you want to switch to 簡易課税 for the 2027 tax year, you must file the 消費税簡易課税制度選択届出書 by December 31, 2026.

Miss that deadline and you default to 本則課税 for all of 2027 — which, as the example above shows, can be the most expensive option for service-industry freelancers.

The 3割特例 does not require a filing — it applies automatically to eligible individual sole proprietors. But it's only available through September 2028, so you need to decide your longer-term strategy now.

Decision Framework

Here's how to think about this:

Your expenses are low relative to revenue (most service freelancers): Use the 3割特例 for October 2026–September 2028, then switch to 簡易課税 when the 3割特例 expires. File the 簡易課税届出書 before December 31, 2028.

Your expenses are high relative to revenue (manufacturing, retail with inventory): Run the numbers for 本則課税 vs 簡易課税. If your actual input tax exceeds the deemed purchase deduction, 本則課税 saves money despite the extra bookkeeping.

You primarily sell to consumers (B2C): Consider whether staying registered is even necessary. Consumers can't claim input tax credits, so your registration status doesn't affect them. If your revenue is under ¥10M, tax-exempt status may be optimal.

You're a corporation (法人): The 3割特例 is not available to you. Your options are 簡易課税, 本則課税, or (if eligible) tax-exempt status. This distinction matters — don't assume the individual rules apply.

What to Do Right Now

  1. Run the numbers. Use a calculator that includes all four methods — not just three. Most Japanese tools haven't updated for the 3割特例 yet. Our consumption tax optimizer includes all four methods →

  2. Mark December 31, 2026 on your calendar. If 簡易課税 is your best option for 2027, you need to file the election form before this date.

  3. Talk to your 税理士. This article gives you the framework, but your specific situation — multiple income types, mixed B2B/B2C sales, mid-year registration — may have nuances that affect the optimal choice.

  4. Don't panic. The 3割特例 is specifically designed to prevent a sudden jump from 20% to 50%+ for individual freelancers. The transition is gradual: 20% → 30% → your chosen method. The government created this buffer because they know the cliff would have been too steep.

Further Reading

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