Please find this month’s topics below. We hope they will be useful to you.
▼Taxation
Change in the Input Tax Credit Percentage for Purchases from Tax-Exempt Businesses
Under the transitional measures of the invoice system, taxable purchases made from businesses that are not qualified invoice issuers (commonly referred to as ‘tax-exempt businesses’) are currently eligible for an input tax credit equal to 80% of the corresponding consumption tax amount.
This deductible percentage will be reduced to 70% for transactions conducted on or after October 1, 2026. As this change may affect accounting procedures, accounting software settings, and invoice review processes, businesses should take appropriate precautions.
As a general rule, the applicable deduction percentage is determined based on the timing of the transaction. For transfers of assets, the determining date is the date on which the asset is delivered, while for the provision of services, it is the date on which the service is completed. For example, even if rent for the following month is paid in advance during the previous month, as a service, rent relating to October 2026 will be subject to the 70% deduction rate even if the payment itself was made in September 2026.
▼Labor Management
“How to Conduct Year-End Adjustments for 2026” Published
The National Tax Agency has published the “Guidelines for Year-End Tax Adjustments for 2026 Tax Year,” which reflect 2026 tax reforms. The following changes will take effect starting with the year-end tax adjustments conducted in December of 2026.
- Increase in the basic deduction amount based on total income
- Increase in the minimum guaranteed amount for the salary income deduction from 650,000 yen to 740,000 yen
- Revision of income requirements for dependents and others
- Establishment of a special provision for the life insurance premium deduction when having dependents under the age of 23
For companies handling year-end adjustment procedures, it is important to verify the impact on deduction amounts and the information to be included on various tax return forms. Please note that the payment deadline for withholding tax related to year-end adjustments is January 12, 2027; if a special payment deadline provision is applied, the deadline is January 20, 2027.
Source: National Tax Agency, How to File the Year-End Tax Adjustment for 2026