All receipts dated from 1 October 2026 from unregistered suppliers (those without a valid T-number) will qualify for only 50% input tax credit — down from 80% during the first transitional period (October 2023 – September 2026). Capsure's portal AI suggests the correct JDL code based on transaction date; your accounting team confirms and exports.
Background: Japan's Qualified Invoice System
Japan introduced the Qualified Invoice System (適格請求書等保存方式, commonly called the インボイス制度) on 1 October 2023. Under this system, businesses registered as Consumption Tax payers can only claim full input tax deductions on purchases where the supplier has issued a qualified invoice — a receipt or invoice bearing the supplier's 登録番号 (T-number), issued by a supplier registered with the NTA (National Tax Agency).
The intent of the system is to close a gap in consumption tax collection: previously, businesses could claim input tax credits on purchases from unregistered micro-businesses who did not remit the consumption tax they collected. Under the invoice system, only purchases from tax-registered suppliers generate full deduction rights.
Recognising that an immediate cliff would cause hardship for businesses with many small, unregistered suppliers, the NTA introduced a transitional deduction schedule: businesses can still claim a partial input tax credit on purchases from unregistered suppliers during the transitional periods.
The Transitional Deduction Schedule
| Period | Dates | Input Tax Credit | JDL Code | Status |
|---|---|---|---|---|
| Pre-System | Before 30 Sep 2023 | 100% | 11 / 13 | Historical records only |
| Transitional Period 1 | 1 Oct 2023 – 30 Sep 2026 | 80% | 81 | Ending soon |
| Transitional Period 2 | 1 Oct 2026 – 30 Sep 2029 | 50% | 51 | ⚠ Begins Oct 2026 |
| Post-Transitional | From 1 Oct 2029 | 0% | 00 | No deduction |
The transition only applies to purchases from unregistered suppliers. Purchases from NTA-registered qualified invoice issuers always generate 100% input tax credit, regardless of period.
What It Costs: A Worked Example
Consider a small manufacturing firm that spends ¥3,000,000 per month on taxable purchases. Through a combination of freelancers, small local suppliers, and market vendors, roughly 20% — ¥600,000 — comes from unregistered suppliers.
This calculation assumes the business is large enough to be excluded from the 少額特例 (Small-Amount Special Provision) — businesses with annual taxable sales ≤ ¥100M can claim full input tax credits on purchases under ¥10,000 per transaction from unregistered suppliers, regardless of invoice status. Capsure applies the 少額特例 automatically when the entity's registered profile indicates eligibility.
Who Is Affected
The October 2026 cliff primarily affects businesses that:
- Use freelancers or individual contractors who may not be registered as consumption tax payers (particularly common in creative, translation, and tech industries).
- Purchase from market stalls, small restaurants, or convenience stores that have not registered under the invoice system.
- Have expenses processed by a third party (such as an accounting firm) who may not be checking T-number status on every receipt.
- Operate in industries with high volumes of small-ticket receipts where per-receipt manual T-number verification is not economically feasible.
Without automated T-number extraction and verification, neither your clients nor your team can identify which receipts will attract only 50% credit after October 2026. Manual spot-checking is not scalable when a company processes hundreds of receipts per month. Capsure automates the lookup and flags every unregistered-supplier receipt at capture time — before it reaches your inbox.
How Capsure Handles the Transition Automatically
Capsure's tax code assignment engine is aware of the full transitional schedule. At the point of export — or when a verification result arrives from the NTA API — Capsure compares the receipt's transaction date against the transitional periods and assigns the correct JDL code:
- Receipts from registered issuers → code 11 (10% rate) or 13 (8% reduced rate)
- Receipts from unregistered issuers, dated before 30 Sep 2026 → code 81 (80% transitional)
- Receipts from unregistered issuers, dated from 1 Oct 2026 → code 51 (50% transitional)
- Receipts from unregistered issuers, dated from 1 Oct 2029 → code 00 (non-deductible)
No configuration change, no code update, no manual rule adjustment is needed when the cliff occurs. Capsure handles the date boundary automatically.
The 少額特例: Who Qualifies
The 少額特例 (小規模事業者に係る税額計算の特例) is a relief provision for smaller businesses. Under this provision, businesses with annual taxable sales of ¥100M or less in their base period can claim full input tax credit on any taxable purchase under ¥10,000 per invoice/receipt, even from unregistered suppliers, without needing a qualified invoice.
This provision has a sunset: it applies until 30 September 2029, coinciding with the end of Transitional Period 2. From 1 October 2029, all businesses — including those previously eligible for the 少額特例 — must hold a qualified invoice to claim any input tax credit.
In your Capsure portal, mark a client entity as 少額特例 eligible (annual taxable sales ≤ ¥100M). Capsure will automatically apply full input tax credit to sub-¥10,000 purchases from unregistered suppliers for that entity — assigning codes 11 or 13 instead of 81 or 51 — until 30 September 2029. No per-receipt manual override required.
The Action List for Accounting Firms
- Audit your clients' current supplier lists for unregistered suppliers. Any supplier who regularly issues invoices above ¥10,000 and doesn't have a T-number will start generating 50% credit after October 2026.
- Flag affected clients before October 2026. Give them time to negotiate with suppliers about registering — or to factor the additional tax cost into their pricing decisions.
- Verify that your expense processing workflow extracts and checks T-numbers for every receipt. This is the single highest-leverage change you can make: a verified receipt generates 100% credit; an unverified one from an unregistered supplier is worth half as much after October.
- Register your 少額特例-eligible clients so sub-¥10,000 receipts continue to generate full credit until October 2029.
- Plan for October 2029. The 少額特例 and all transitional provisions expire. From that date, no qualified invoice = no input tax credit, for any amount, from any unregistered supplier.