This is an English translation of our Japanese article. The Japanese version and the National Tax Agency's own materials are authoritative. The measures described take effect only if the bill passes the Diet. For decisions about your own filings, consult a tax office or a licensed tax accountant.
Last updated: 16 September 2026. Based on the outline approved by Cabinet on 15 September 2026 and the leaflet and Q&A published the same day by Japan's National Tax Agency (September 2026 edition). The content reflects the position if the bill is passed by the Diet — deliberations in the extraordinary session have not yet begun.
From 1 April 2027, consumption tax on food and drink falls to 1% for two years. Buyers simply pay less. Sellers, however, can lose money by doing nothing: sales are taxed at 1% while costs stay at 10%, so a business on the standard method may be entitled to a refund. Tax-exempt businesses and those on the simplified method cannot claim it. The outline provides seven special measures to make switching easier.
Why a refund arises — 1% on sales, 10% on costs
Japanese consumption tax is "tax collected minus tax paid". Normally the rate on sales is the higher one, so you remit tax. But when only food and drink drops to 1%, the tax you collect shrinks sharply — while fertiliser, packaging, utilities, rent, freight and equipment stay at 10%.
(0.78% national + 0.22% local)
rent and other costs
31 March 2029
Example 1: a sole proprietor selling produce (standard method)
Sales ¥7,000,000 (rice and vegetables) → tax collected ¥70,000 (1%)
Taxable purchases ¥4,000,000 (fertiliser, chemicals, fuel, materials, repairs at 10%) → tax paid ¥400,000
¥70,000 − ¥400,000 = ¥330,000 refund
Example 2: a small bakery selling wholesale (standard method)
Sales ¥12,000,000 (wholesale bread) → tax collected ¥120,000 (1%)
Ingredients ¥4,000,000 (flour, butter — food at 1%) → ¥40,000
Packaging, utilities, rent, subcontracting ¥3,000,000 (10%) → ¥300,000
¥120,000 − (¥40,000 + ¥300,000) = ¥220,000 refund
The figures rest on assumptions, but the relationship holds: the higher the share of costs bought at 10%, the larger the refund. Farming, food manufacturing, and food wholesale and retail are affected — especially businesses planning capital investment during these two years.
Tax-exempt businesses and those on the simplified method cannot claim a refund. Exempt businesses have no filing obligation and correspondingly no input tax credit. The simplified method derives input tax mechanically from sales, so what you actually paid is irrelevant and no refund arises (NTA Q&A, Q3-1). To claim the refund you must become a taxable business using the standard method.
Which are you? Three positions, three moves
ATax-exempt (taxable sales of ¥10m or less in the base period)
No refund. To claim one, file a "notification of election to become a taxable business". Normally this must be filed before the taxable period begins, but a special measure lets you file during the taxable period that contains 1 April 2027 — by the end of 2027 for sole proprietors — and be treated as taxable from the start of that period.
For sole proprietors that means becoming taxable from 1 January 2027, so food sales in January to March are taxed at 8%. You also cannot return to exempt status for 2027 and 2028.
BOn the simplified method
No refund. To return to the standard method, file a "notification of discontinuance of the simplified method" — again, during the taxable period containing 1 April 2027 is enough.
More importantly, the usual two-year lock-in on the simplified method does not apply to the taxable period containing 1 April 2027. Even if you elected the simplified method only last year, you can leave.
Staying is also an option: special measure ⑤ below then applies automatically and reduces what you owe.
CAlready taxable and on the standard method
No filing needed. File as usual and the refund follows. What you do need is to update tax-rate settings in tills and accounting systems and check your separate-rate bookkeeping and invoice entries.
To receive the refund sooner you can shorten your taxable period to three months or one month. Returns become three or twelve times as frequent, and you cannot stop for two years, so weigh it against your cash-flow needs.
The seven special measures
| # | Measure | What it does |
|---|---|---|
| ① | Scope and rate | Food and drink at 1% (0.78% national + 0.22% local); newspaper subscriptions stay at 8%; everything else 10%. The scope of "food and drink" is the same as what was taxed at 8% before 1 April 2027 |
| ② | Transitional treatment | Sales on or after 1 April 2027 under certain recurring-supply contracts and mail order remain at 8% (unless the contract is confirmed to assume 1%, or is amended) |
| ③ | Exempt → taxable filing | File during the taxable period containing 1 April 2027 (end of 2027 for sole proprietors) and you are taxable from the start of that period |
| ④ | Simplified → standard filing | Same timing, and the two-year lock-in does not apply |
| ⑤ | Simplified-method calculation | Regardless of business category, you may book input tax equal to the output tax on food sales. The same applies under the 20% and 30% special rules |
| ⑥ | Interim returns | You may file a provisional interim return computed as if 1% had applied to the prior period's food sales and purchases (zero is acceptable) |
| ⑦ | Tax-inclusive display | From 1 February to 31 May 2027, displaying prices at either 8% or 1% is permitted where relabelling is genuinely difficult, provided the display does not mislead. Mixed old and new rates are allowed |
Measure ⑤ is effectively a tax cut. Take the NTA's own worked example: food retail of ¥20,000,000 (tax ¥200,000) and general goods retail of ¥3,000,000 (tax ¥300,000), both in category 2 (deemed purchase rate 80%). Against output tax of ¥500,000 you may deduct ¥200,000 on food (equal to the output tax) plus ¥240,000 on goods (¥300,000 × 80%) = ¥440,000, leaving ¥60,000 to pay. Without the measure the deduction would be ¥500,000 × 80% = ¥400,000 and you would pay ¥100,000 — so it saves ¥40,000. No filing is required.
Working back from the deadlines
| When | What to do |
|---|---|
| By 31 December 2026 | The ordinary route. No need to rush if you intend to use the special measure |
| 1 Feb – 31 May 2027 | Grace period for tax-inclusive price displays. Relabel during this window |
| By 17 March 2027 | Deadline to apply under the invoice-registration transitional rule (15 days before a 1 April 2027 registration date). This route makes you taxable mid-period, from 1 April |
| By 31 March 2027 | Deadline to shorten your taxable period for earlier refunds |
| 1 April 2027 | Food and drink move to 1%. Switch tills, ordering and accounting systems |
| By 31 December 2027 | The key deadline. File the election or discontinuance notification by this date and it applies retroactively from 1 January 2027 |
| During 2028 | To return to exempt status in 2029, file the discontinuance notification this year |
| 1 April 2029 | Back to 8%. The display grace period runs 1 February to 31 May 2029 |
The biggest gain here is that you can decide after the fact. Normally these notifications must be filed before the year starts, when you cannot yet know whether you will gain or lose. Under this measure you can see most of 2027's results before deciding, right up to the end of that year. There is no need to rush during 2026.
Three traps before you switch
- Two years, no way back. Once you elect taxable status, a sole proprietor is locked in for 2027 and 2028. Since the rate returns to 8% in April 2029, the source of the refund disappears — so "be taxable only while the cut lasts" does not really work. Plan the exit (a discontinuance notification during 2028) at the same time as the entry.
- Invoice registration brings an issuing obligation. The transitional rule lets you become taxable mid-period on 1 April 2027, but you must then issue qualified invoices. If you sell only to consumers the benefit is thin and the paperwork is real.
- Your non-food sales become taxable too. As a taxable business you remit tax on general goods, dine-in meals and anything else at 10%. Where food is a small share of turnover, tax payable can exceed the refund. Decide on the whole business, not the food line.
Summary
- From April 1, 2027, for two years, the consumption tax on food and beverages will be 1%, while expenses such as supplies, utilities, and rent remain at 10%.
- With sales taxed at 1% but expenses at 10%, this reversal means businesses under the standard taxation method can end up receiving a consumption tax refund.
- Tax-exempt businesses and those under the simplified taxation system cannot receive refunds. To qualify, a business must become a taxable entity using the standard taxation method.
- The notification only needs to be filed during the tax period that includes April 1, 2027 (by the end of 2027 for individuals), and the usual two-year lock-in for simplified taxation does not apply.
- Once you choose to become a taxable business, you cannot revert to tax-exempt status for two years, 2027 and 2028. Even staying on simplified taxation, a special calculation can lower the tax payable.
Sources
- National Tax Agency: consumption tax rate reduction portal (opened 15 September 2026; updated regularly)
- NTA leaflet: the two-year reduction for food and drink (September 2026; source of the seven measures)
- NTA Q&A on the two-year reduction for food and drink (September 2026; filings and refunds)
- Outline on the temporary reduction of consumption tax on food and drink and the introduction of the employment burden relief benefit (Cabinet decision, 15 September 2026)
General information as of 16 September 2026. The measures apply only if the bill passes the Diet and may change during deliberation. For your own filings, consult a tax office or a licensed tax accountant.
