On 18 November 2016, the bills to postpone the consumption tax rate increase by two and a half years were passed by the extraordinary session of the Japanese Diet, thereby delaying the consumption tax rate increase from 8 percent until 10 percent on 1 October 2019.
A multiple tax rate system where the reduced tax rate of 8 percent will be applied to certain transactions including sales of food/beverages will also be introduced along with the increase in the consumption tax rate. Furthermore, an invoicing system will be introduced so that the creditable tax amount can be calculated properly under the multiple tax rate system. However, this will start on 1 October 2023, i.e. 4 years after the introduction of the multiple tax rate system, considering the fact that businesses need a time to prepare for the new system.
We have set out in this newsletter a brief summary of transactions subject to the reduced tax rate, details of the invoicing system and the 4-year transitional measures.