From 1 October 2026, businesses in Japan can recover only 70% of the Japanese Consumption Tax (JCT) on purchases from suppliers that are not registered under the Qualified Invoice System, down from 80%. The creditable portion will fall to 50% from 1 October 2028 and to 30% from 1 October 2030. From 1 October 2031, no credit will be available.

The FY2026 tax reform also tightens the cap on this relief. Where purchases from a single unregistered supplier exceed ¥100 million in a taxable period (previously ¥1 billion), the excess is not eligible. The new cap applies from taxable periods beginning on or after 1 October 2026.

The “20% special rule” for businesses that became JCT-registered because of the invoice system ends with the taxable period that includes 30 September 2026. A new “30% special rule” will be available to individuals for 2027 and 2028, but there is no extension for companies.

For the practical implications, including the cut-off rule for purchases spanning September and October and what to flag to headquarters, see our article.

This notice is a general summary based on information published by Japan’s National Tax Agency as of September 2026 and does not constitute tax advice.