Challenges Ahead for Sole Proprietors! The Complex World of ‘Fixed Tax Reduction’ Starting in June – Confusion Looms Over Short-Lived System

As far as the field of tax returns is concerned, those who have not yet registered for the invoice system are as usual, while those who have registered for the invoice system (including corporations) had different difficulties depending on the taxation system to be applied.

For those registered under the invoice system (including corporations), the difficulties differed depending on the taxation system applied. “There are three calculation formulas for filing consumption tax returns: regular taxation, simplified taxation, and the 20% special exception. However, since most of our clients were either simplified taxation or 20% special exception, it was not that much of a hassle. Overall, we had to do more entry and confirmation work for the added items, so I would say it was about a 1.5-fold increase in time.

What left an impression on me was the wide variation in understanding among the creators, and the fact that many of them could not issue qualified invoices correctly. Some were supposed to be registered in the invoice system but did not fill in their registration number, some did not fill in their tax rate, or on the contrary, they filled in the wrong tax rate. …… There were a lot of small errors and a lot of questions from our corporate clients.”

The reason for the confusion was a lack of understanding of the sales tax… Next year, tax payments will be four times higher than this year!

Many others were unaware that the invoice only applies to the three months from October to December for this tax payment,” said Yamada.

Some customers told us after paying the tax, ‘You will pay this amount of tax next year, too, right? When I told them that the amount for this year is for three months, so next year it will be four times as much, they asked me if I wanted to cancel their registration for the invoice system. I found a way to cancel the registration starting the following month, so I consulted my fellow tax accountants and uploaded the video to YouTube at the end of March, and received many appreciative comments. I was surprised at the number of people who wanted to cancel their registration.”

This is how he realized that many people lack knowledge about consumption tax before understanding the invoice system, and that this is something that needs to be improved.

As a matter of course, the invoice system is more than just registering and issuing a qualified invoice,” he said. You become a taxpayer, so you also need to know about consumption tax. You need to know about “tax inclusive accounting,” “tax exclusive accounting,” “rebate calculation,” “pile-up calculation,” and so on. The consumption tax rates have been 10% and 8% since Reiwa 2028, but the national consumption tax is usually 7.8% (the remainder is 2.2% for local areas), while the reduced tax rate is 6.24% (the remainder is 1.76% for local areas), because the calculation is divided between the national and local governments.

So it is true that the e-Tax only says ‘reduced tax rate of 6.24%’ instead of the familiar ‘reduced tax rate of 8%’ in the national sales tax filing section.

Unfortunately, I guess they don’t take into account people who aren’t familiar with the sales tax,” said Mr. Kato. In addition, there is a method called ‘appropriation,’ in which the refund is used to pay taxes, but it is not well known to many people. I thought that the government needs to widely disseminate information about consumption tax, including explanations of such matters.