Guide to subsidies and grants: a thorough comparison of the IT Introduction, Sustainability, and Monozukuri subsidies
The subsidies and grants offered by the government and local authorities are powerful schemes that, used well, let public funds cover the bulk of your capital investment or hiring costs. But there are many kinds, with requirements, ceilings, and application periods that all differ, so in reality it is hard to tell "which one should I apply for." This article compares and explains the four major schemes that drew the most attention in 2025–2026.
A "subsidy" (hojokin) involves a selection review, where you compete on the content of your business plan (adoption rates range from 20% to 70% depending on the scheme). A "grant" (joseikin) can in principle be received once you meet the criteria, and is rarely rejected in a review. Both are non-repayable. The point that the amount received becomes taxable income is the same for both.
The four major schemes at a glance
IT Introduction Subsidy
Sustainability Subsidy
Monozukuri Subsidy
Career Up Grant
① IT Introduction Subsidy
This is a subsidy that supports the digitalization of SMEs and small businesses. The Ministry of Economy, Trade and Industry issues a public call every year, and it continued in fiscal 2025. You apply through an IT introduction support vendor for things like accounting software, POS registers, ordering systems, and EC-site building tools.
IT Introduction Subsidy details (fiscal 2025)
The cost of introducing invoice-compliant accounting software (freee, Money Forward, etc.) is subsidized at 3/4. With a ceiling of ¥500,000, it is a frame that even small businesses can apply for easily.
② Small Business Sustainability Subsidy
This supports "opening up sales channels" and "improving productivity" for small businesses, including sole proprietors and freelancers. The standard frame has a subsidy ceiling of ¥500,000, but special categories such as the wage-increase frame and the start-up frame raise it to as much as ¥2 million.
Sustainability Subsidy details (fiscal 2025)
Website production costs are eligible, but you cannot claim more than 1/4 of the subsidy's use for them. You need to apply by combining website production not on its own but with other expenses such as running ads or purchasing fixtures.
③ Monozukuri, Commerce, and Services Productivity Improvement Promotion Subsidy (Monozukuri Subsidy)
This is a scheme that subsidizes 1/2 to 2/3 of the costs when an SME carries out capital investment, system development, or new-service development. Because the subsidy ceiling is large, up to ¥15 million, it is widely used for equipment renewal in manufacturing, IT, and services companies.
Monozukuri Subsidy details (fiscal 2025)
Even after being selected, the Monozukuri Subsidy requires reporting on the commercialization status for 3 to 5 years. If sales exceed a certain level, "profit repayment" — returning part of the subsidy — may arise.
④ Career Up Grant (regular-employee conversion course)
This is a grant paid to employers who convert part-time or fixed-term workers into regular employees. It is administered by the Ministry of Health, Labour and Welfare, and because there is no review (no selection review), you can in principle receive it once you meet the criteria[Ministry of Health, Labour and Welfare (in Japanese)]. Because it is funded by employment insurance premiums, it is available to employers enrolled in employment insurance.
Career Up Grant (regular-employee conversion course) details
Even a sole proprietor is eligible to receive it if they employ part-time staff and have enrolled them in employment insurance. Be sure to submit the Career Up plan document in advance at the time you hire a regular employee.
Tax treatment of subsidies: once you receive one, a tax return is required
Subsidies and grants are taxable income. You must report them as business income (or miscellaneous income) for the year you receive them. They are not "free money" that is tax-exempt, so take care[National Tax Agency No.5765].
| Scheme | Income category for tax purposes | Timing of recognition |
|---|---|---|
| IT Introduction Subsidy | Business income (miscellaneous revenue) | The year in which the decision to grant the subsidy falls |
| Sustainability Subsidy | Business income (miscellaneous revenue) | The year in which the subsidy is received |
| Monozukuri Subsidy | Business income (miscellaneous revenue) | Date of the grant decision or the date of receipt (judged by the principle of consistency) |
| Career Up Grant | Business income (miscellaneous revenue) | The year in which the payment decision falls |
If you purchase equipment with a subsidy, using compressed entry accounting (assset-value reduction, atsushuku-kicho) can hold down the tax burden in the year of purchase. It is a mechanism that compresses (reduces) the acquisition cost of the equipment by the subsidy amount and also makes depreciation smaller, thereby deferring taxation to the following year and beyond. It can be applied only by businesses that file a blue return.
Common steps in applying
- 1Obtain a GBiz ID | A GBiz ID is required for the IT Introduction Subsidy and the Monozukuri Subsidy. Both corporations and sole proprietors can obtain one free of charge (prepare early, as the review takes 1 to 2 weeks).
- 2Check the call guidelines | The scheme details, eligible expenses, and deadlines change every fiscal year. Always check the latest call guidelines on the Small and Medium Enterprise Agency's official site (j-net21.smrj.go.jp)[J-Net21].
- 3Draw up a business plan | For selection-type subsidies (IT Introduction, Sustainability, Monozukuri), the quality of the business plan determines acceptance or rejection. It is important to describe "the current challenge → what you will undertake → the expected effect" with concrete figures.
- 4Apply electronically | In principle everything is an online application. After applying, a selection notice arrives, and only after being selected do you place orders, purchase, and pay. Note that costs ordered or paid before selection are not eligible.
- 5Performance report and receipt of the subsidy | Once the project is complete, submit a performance report, receipts, and so on. After confirmation, the subsidy is transferred (a pay-later method). In other words, you have to front the money yourself at first.
Operators who advertise a "guaranteed selection" via social media or phone may be scams. There is no such thing as a selection guarantee for subsidies. Application agency work itself is legal, but a success-fee model (payment only if selected) is the norm. Do not go near operators who demand a large advance fee.
Summary
FAQ
What is the difference between a subsidy and a grant?
A grant (joseikin) can in principle be received once you meet the criteria (mainly employment-related, from the MHLW side), whereas a subsidy (hojokin) has a review and selection, and the number of cases is limited by the budget frame (mainly from the METI and local-government side).
Is a subsidy received subject to tax?
A subsidy or grant received by a business is in principle included in gains or in the revenue of business income and is taxable. National-treasury subsidies and the like used to acquire fixed assets can defer taxation through compressed entry accounting.
What should I be especially careful of when applying?
As a rule, ordering, contracting, or paying before selection (the grant decision) makes you ineligible. Most use a pay-later (settlement) method, and a GBiz ID must be obtained in advance for the electronic application.
Reference links (sources)
This article is based on materials from the following public bodies (neutral, primary sources). The contents and requirements of public calls are updated from time to time, so always check the official call guidelines before applying.
- Small and Medium Enterprise Agency — IT Introduction Subsidy (in Japanese)
- Small Business Sustainability Subsidy official site (in Japanese)
- Monozukuri Subsidy Project official website (in Japanese)
- Ministry of Health, Labour and Welfare — Career Up Grant (in Japanese)
- National Tax Agency — Tax Answer No.5765 Compressed entry accounting for subsidies, etc. (in Japanese)
- J-Net21 (Organization for Small & Medium Enterprises and Regional Innovation) subsidy and grant information (in Japanese)
* The contents of this article are for informational purposes and are not tax or application advice. Please confirm the latest call guidelines on each official site.