Newsletter #015 Starting and Running a Business in Japan – Part 11 Can You Deduct a Small Purchase All at Once?

Helping foreign business owners understand Japan's tax system—one topic at a time.

Last week, we learned that the cost of some business assets must be deducted over several years through depreciation.

But what happens when you buy a relatively inexpensive item, such as a computer or office equipment?

In some cases, you can deduct the full cost in the year you start using it for business.

Let's look at three important rules.

1. Items Costing Less Than ¥100,000

If an item costs less than ¥100,000, you can generally deduct its full cost as a business expense in the year you start using it for business.

Example

You buy a printer for ¥25,000 and use it for your business.

You can generally deduct the full ¥25,000 in that year.

2. Items Costing ¥100,000 or More but Less Than ¥200,000

For these items, you may be able to choose a system called lump-sum depreciation.

Under this system, the cost is divided equally over three years.

Example

You buy business equipment for ¥150,000.

You may deduct ¥50,000 per year for three years.

This is one option under the tax rules. It is different from deducting the full cost immediately.

3. A Special Rule for Certain Blue Return Taxpayers and Small Businesses

There is another useful rule for eligible taxpayers who meet the requirements for the small-asset special treatment.

Under the rules applicable to assets acquired on or after April 1, 2026, qualifying assets costing less than ¥400,000 each may be deducted in full in the year they are first used for business.

However, the total amount covered by this special treatment is generally limited to ¥3,000,000 per year.

For example, if an eligible business buys a computer for ¥350,000 and meets all the requirements, it may be able to deduct the full ¥350,000 in that year.

This rule is not available to every business. Eligibility depends on factors such as the taxpayer's status and the applicable conditions. For companies, the rules include requirements concerning the company's size and other matters.

4. Which Rule Should You Use?

The rules can be summarized as follows:

Purchase price	General treatment
Less than ¥100,000	Generally, deduct the full cost immediately
¥100,000 to less than ¥200,000	Ordinary depreciation or, if eligible, three-year lump-sum depreciation
¥200,000 to less than ¥400,000	Generally, depreciation; eligible taxpayers may qualify for the special treatment
¥400,000 or more	Generally, depreciation over the applicable useful life

These are general guidelines. The available treatment depends on the asset, the taxpayer's circumstances, and the applicable tax requirements.

5. What Should You Check Before Recording the Expense?

Before treating a purchase as an immediate expense, check three things:

• The price: How much did the item cost?

• Your eligibility: Can you use the relevant special rule?

• Business use: Has the item actually been put into use for your business, and is it used for business or partly for personal purposes?

Keep the receipt or invoice and record the purchase properly in your accounting records.

If you are unsure which treatment applies, check before filing your tax return.

Key Takeaway

A purchase does not always have to be depreciated over several years.

Japan has rules that allow certain low-cost business assets to be deducted immediately or over a shorter period. Knowing these rules can help you manage your bookkeeping and tax expenses correctly.

Do not decide based on the price alone. Check which rule applies to your business.

Coming Next

Starting and Running a Business in Japan – Part 12: What Records Should You Keep for Your Tax Return?

Prepared by

Kyoji Yasui Tax Accountant Office

Helping foreign business owners understand Japan's tax system with clear, practical guidance.