Glossary

Whether a business must pay consumption tax depends on its taxable sales in the base period, for a company usually the business year two years earlier.

A newly established company has no base period in its first two years. With capital under 10 million yen it is then usually exempt — unless, among other exceptions, it registers as a qualified invoice issuer or belongs to a group with more than 5 billion yen in revenue (for tax periods from 1 October 2024).

Consumption tax is Japan's equivalent of VAT. The rate is 10%, or 8% for food and non-alcoholic beverages (not eating out) and for newspapers sold by subscription and published at least twice a week.

Businesses deduct the consumption tax they paid on purchases from the tax on their sales; since October 2023 this requires qualified invoices.

A G.K. (合同会社, godo kaisha) is a Japanese limited liability company. It has simpler governance than a K.K.; foreign companies also use it for their Japanese entity.

A K.K. (株式会社, kabushiki kaisha) is a Japanese joint-stock company. Foreign companies use it for their Japanese subsidiaries.

The smaller alternative is the G.K. (合同会社, godo kaisha), a limited liability company with simpler governance.

Since 1 October 2023 Japan uses the qualified invoice system (インボイス制度): a buyer can deduct the consumption tax on a purchase in full only if it holds a qualified invoice from a registered supplier.

A qualified invoice shows, among other details, the supplier's registration number (T-number), the amounts and the consumption tax for each tax rate (10% and 8%). Only businesses registered as qualified invoice issuers may issue one.

A business that registers with the National Tax Agency as a qualified invoice issuer receives a registration number. For a company it is the letter T followed by its 13-digit corporate number; for other businesses T followed by 13 digits.

Japanese buyers need this number on the invoice to deduct the full consumption tax they paid. Without it, they can deduct only a transitional share: 70% since 1 October 2026, falling to 50%, then 30%, and to nothing from October 2031.