Simplified vs General Consumption Tax – Which Should You Choose?

If you run a business in Japan, you may need to choose between:

• the Simplified Tax Scheme, or

• the General Tax Method

This choice can affect how much consumption tax you pay.

What is the difference?

1. Simplified Tax Scheme

• Available if your sales are JPY 50 million or less

• Uses a fixed percentage (deemed rate)

• No need to calculate actual purchase tax

👉 Simple and easy to manage

2. General Tax Method

• Calculates tax based on actual sales and purchases

• More accurate, but more complex

👉 More work, but sometimes lower tax

When is Simplified Tax better?

The simplified scheme may be better if:

• Your expenses are low

• Your business has high profit margins

• You want less accounting work

When is General Tax better?

The general method may be better if:

• You have large expenses or investments

• You purchased equipment or assets

• You want to claim full input tax credits

Important: You cannot change freely

• You must file a notification in advance

• Once chosen, the method usually continues for at least 2 years

👉 Choosing the wrong method can increase your tax burden

For foreign business owners

• Do not choose based on simplicity alone

• Compare your expected costs and sales

• Consider future investments