Is it true that if you don’t register for the invoice system, your clients will stop doing business with you?

“I was told I can’t keep doing business unless I register for the invoice system.” Have you heard this kind of worry among freelancers and sole proprietors?

Three years have passed since the invoice system started in October 2023. Around registration, a story has spread that “if you don’t register, your transactions will be stopped.” The law does not decide whether a transaction is stopped.

We checked this rumor against the text of the Consumption Tax Act and the official information of the National Tax Agency (NTA) and the Japan Fair Trade Commission.

Four tax terms to know first

Here are plain-language explanations of the terms used in this article.

• Invoice (qualified invoice) = An invoice that states the consumption tax amount and other required items. Only a business that has registered with the tax office (a qualified invoice issuer, also called a “tekikaku seikyusho hakko jigyosha”) can issue one.
• Tax-exempt business (menzei jigyosha) = A business whose taxable sales in the base period (two years earlier for individuals) were ¥10 million or less, and which is exempt from the obligation to pay consumption tax.
• Input tax credit (shiire zeigaku koujo) = The system in which a taxable business subtracts the consumption tax it paid on purchases and expenses from the tax it owes. In principle, you must keep the invoice.
• Transitional measure (keika sochi) = A time-limited rule that lets a buyer deduct a certain percentage even on purchases from tax-exempt businesses and the like, which lightens the buyer’s burden.

Conclusion

Our verdict: “Half true.” The claim that “the law requires it” is false. The claim that “you may actually be asked to register” is correct.

The law does not force registration

First, let’s look at the registration rule itself: Consumption Tax Act, Article 57-2, paragraph 1 (e-Gov Law Search).

国内において課税資産の譲渡等を行い、又は行おうとする事業者であつて、第五十七条の四第一項に規定する適格請求書の交付をしようとする事業者（第九条第一項本文の規定により消費税を納める義務が免除される事業者を除く。）は、税務署長の登録を受けることができる。［1］

Reference translation (unofficial): A business that makes or intends to make taxable transfers of assets, etc. in Japan and that intends to issue the qualified invoice prescribed in Article 57-4, paragraph 1 (excluding a business exempt from the obligation to pay consumption tax under the main text of Article 9, paragraph 1) may receive registration from the head of the tax office.

(Excerpt)

In other words: “a business that wants to issue invoices (qualified invoices) may receive registration from the head of the tax office.” So registration is a right, not an obligation. The parenthetical in the quotation describes the mechanism that even someone who is currently tax-exempt becomes a taxable business once registered. There is no provision saying “you must register.” We also found no provision in the Consumption Tax Act that prohibits dealing with a business that has not registered.

Remaining tax-exempt is also a legal right. Consumption Tax Act, Article 9, paragraph 1 provides as follows.

事業者のうち、その課税期間に係る基準期間における課税売上高が千万円以下である者（適格請求書発行事業者を除く。）については、第五条第一項の規定にかかわらず、その課税期間中に国内において行つた課税資産の譲渡等及び特定課税仕入れにつき、消費税を納める義務を免除する。［2］

Reference translation (unofficial): A business whose taxable sales in the base period for the taxable period are ¥10 million or less (excluding a qualified invoice issuer) is, notwithstanding Article 5, paragraph 1, exempt from the obligation to pay consumption tax on taxable transfers of assets, etc. and specified taxable purchases made in Japan during that taxable period.

(Excerpt)

A business whose taxable sales in the base period (two years earlier for an individual, the fiscal year before the previous one for a corporation) were ¥10 million or less is exempt from the obligation to pay consumption tax. As the parenthetical says, registering makes you a taxable business, but whether to register is your own choice.

However, once you register, you start filing consumption tax returns and paying the tax. It is true that the burden on the side issuing invoices increases. That is why “register, or stay tax-exempt” is something to decide by calculating.

Why are you being asked to register?

The reason the story “you can’t do business unless you register” appears, even though the law does not order it, is that the buyer’s side bears a tax cost.

For a taxable business (a company or individual that pays consumption tax) to receive an input tax credit, it must in principle keep an invoice. It receives the invoice from the seller and keeps it. If the other party is an unregistered tax-exempt business, it cannot get an invoice. Without one, the buyer cannot deduct the full consumption tax paid on that purchase, and its tax payable goes up.

That said, for some customers there is no effect. The Q&A published by the Japan Fair Trade Commission and others says the following.

免税事業者であり続けたとしても免税事業者の売上先が以下のどちらかに当てはまる場合は、取引への影響は生じないと考えられます。［8］

Reference translation (unofficial): Even if a tax-exempt business remains tax-exempt, if its customer falls under either of the following, no effect on the transaction is expected.

The two cases are: (1) the customer is a consumer or a tax-exempt business, and (2) the customer uses the simplified taxation system. Under simplified taxation, the input tax is calculated by multiplying the output tax by a deemed purchase rate, so there is no need to keep invoices. The note (注) in the Q&A says the same applies when the 20% special rule is used. The NTA says the same about the 30% special rule［5］.

The problem is what comes next. If the customer is an ordinary taxable business, a burden arises for the part it cannot deduct. That is where proposals such as “please register” or “we’d like to review the price” come from. Making such a request is not in itself illegal.

課税事業者が、インボイス制度を踏まえて取引先の免税事業者に対し、課税事業者になるよう要請することがあります。このような要請を行うこと自体は、独占禁止法上問題となるものではありません。［8］

Reference translation (unofficial): A taxable business may, in light of the invoice system, ask a tax-exempt business that is its trading partner to become a taxable business. Making such a request is not in itself a problem under the Antimonopoly Act.

A discussion is different from a unilateral announcement. We look at that dividing line in detail later.

Transitional measures that lighten the buyer’s burden

So that dealing with tax-exempt businesses does not suddenly become disadvantageous, the law provides transitional measures. They allow a certain percentage to be deducted, for a limited time, even on purchases from tax-exempt businesses. The NTA explains it as follows.

令和13年（2031年）9月末までは、インボイスの保存がなくても仕入税額相当額の一定割合を仕入税額とみなして控除できる経過措置が設けられています。［5］

Reference translation (unofficial): Until the end of September 2031 (Reiwa 13), a transitional measure is provided under which, even without keeping an invoice, a certain percentage of the amount equivalent to the input tax can be treated as input tax and deducted.

The deductible percentage goes down in steps. The basis is the supplementary provisions of the amending act of 2016 (Heisei 28), which introduced the invoice system (Act No. 15 of 2016). The provisions are somewhat complicated, so we quote the explanation in the NTA’s special feature on the fiscal 2026 (Reiwa 8) tax reform.

免税事業者などインボイス発行事業者以外の者から行った課税仕入れにつき、その一定割合を控除できる経過措置について、適用期限を２年間延長した上で、以下のとおり控除可能割合が見直されました。［4］

Reference translation (unofficial): For the transitional measure that allows a certain percentage to be deducted on taxable purchases made from persons other than invoice issuers, such as tax-exempt businesses, the application deadline has been extended by two years and the deductible percentage has been revised as follows.

The fiscal 2026 (Reiwa 8) reform extended the deadline by two years and revised the percentages. The current schedule is as follows［3］［4］.

The original text of the law confirms this too. For purchases made from October 1, 2026 (Reiwa 8) to September 30, 2031 (Reiwa 13), the amount obtained by multiplying the consideration paid by 7.8/110 (6.24/108 for purchases at the reduced tax rate), and then by the percentage for each period (70%, 50%, 30%), is treated as input tax and can be deducted (supplementary provisions of Act No. 15 of 2016 (Heisei 28), Article 53, paragraph 1)［3］.

The publication date of this article (October 2026) falls just after the 70% deduction period began. Many people will have heard the phrase “80% deduction,” but that period ended on September 30, 2026 (Reiwa 8).

From taxable periods beginning on or after October 1, 2026 (Reiwa 8) (for individual business owners, the 2027 (Reiwa 9) tax year), a cap is added. If total purchases from one trading partner (that is not an invoice issuer) exceed ¥100 million including tax in a year (one business year for a corporation), the excess is not covered by the transitional measure. The cap before the reform was ¥1 billion［4］. ¥100 million a year is a large amount for purchases from a tax-exempt business with sales of ¥10 million or less.

Because of the transitional measure, a buyer can still deduct 70% even on purchases from a tax-exempt business. Only the remaining 30% is a burden. Even so, unilaterally announcing “because you are tax-exempt, we will cut the price by the full amount of consumption tax” is conduct that the Japan Fair Trade Commission treats as a problem［9］.

Special rules if you do register

There are also mechanisms that lighten the burden for people worried that “registering will suddenly make my tax burden heavy.”

The first is the 20% special rule. A small business that registered because of the invoice system can reduce its tax payable.

２割特例は、適格請求書発行事業者の令和５年10月１日から令和８年９月30日までの日の属する各課税期間において、免税事業者（「課税選択届出書」の提出により課税事業者となった免税事業者を含みます。）が適格請求書発行事業者となる場合に適用することができます［6］

Reference translation (unofficial): The 20% special rule can be applied where a tax-exempt business (including a tax-exempt business that became a taxable business by submitting a “notification of election of taxable status”) becomes a qualified invoice issuer, for each taxable period of the qualified invoice issuer that includes a day from October 1, 2023 (Reiwa 5) to September 30, 2026 (Reiwa 8).

(Excerpt)

The mechanism under which the tax payable becomes 20% of the consumption tax on sales is in Supplementary Provision Article 51-2, paragraph 2. Because 80% of the output tax can be deducted as a special deduction, you pay the remaining 20%［10］. An individual business owner can use it up to four times, for tax years 2023 (Reiwa 5) through 2026 (Reiwa 8). The 2026 (Reiwa 8) tax year (January to December 2026) is the last year it applies to individual business owners.

The second is the 30% special rule, newly created in the fiscal 2026 (Reiwa 8) reform. We quote the NTA’s explanation.

インボイス発行事業者の登録を受けたことにより免税事業者から課税事業者となった個人事業者に係る令和９年分・令和10年分の消費税の確定申告において納付税額を売上税額の３割とすることができる特例です。［4］

Reference translation (unofficial): A special rule under which, in the consumption tax final returns for the 2027 (Reiwa 9) and 2028 (Reiwa 10) tax years of an individual business owner who changed from a tax-exempt business to a taxable business by registering as an invoice issuer, the tax payable can be set at 30% of the output tax.

After the 20% special rule ends, individual business owners can still set their tax payable at 30% of the output tax for the 2027 (Reiwa 9) and 2028 (Reiwa 10) tax years. It applies to individual business owners who changed from tax-exempt to taxable by registering, and there are three main requirements: being an individual business owner, having taxable sales of ¥10 million or less in the base period (2025 (Reiwa 7) for the 2027 (Reiwa 9) tax year), and being registered as an invoice issuer［4］.

The third is a transition measure to simplified taxation. When you choose simplified taxation from the taxable period after one in which you used the 20% or 30% special rule, the deadline for submitting the notification is extended. Normally it is the day before the first day of the taxable period in which you want it to apply, but if you submit it by the filing deadline of that taxable period, you can choose simplified taxation from that period［4］. Simplified taxation requires taxable sales of ¥50 million or less in the base period, and once chosen, in principle it must be continued for two years［4］.

With the 20% special rule, the 30% special rule, and simplified taxation, you can receive the input tax credit even without keeping the invoices you receive［5］. After registration, the administrative burden may turn out lighter than you expect.

Where “stopping the transaction” becomes a problem

Next, the rules of negotiation. The Japan Fair Trade Commission Q&A shows where a request from a client to register becomes a problem.

First, the freedom to end a transaction itself is recognized.

事業者がどの事業者と取引するかは基本的に自由ですが、例えば、取引上の地位が相手方に優越している事業者（買手）が、インボイス制度を踏まえて免税事業者である仕入先に対して、一方的に、免税事業者が仕入れ時に支払っていた消費税額も払えないような価格など著しく低い取引価格を設定し、不当に不利益を与えることとなる場合であって、これに応じない相手方との取引を停止した場合には、独占禁止法上問題となるおそれがあります。［8］

Reference translation (unofficial): A business is basically free to choose whom it trades with. However, where, for example, a business in a superior bargaining position over the other party (a buyer), in light of the invoice system, unilaterally sets a remarkably low transaction price toward a tax-exempt supplier, such as a price that does not even cover the consumption tax the tax-exempt business paid when purchasing, thereby causing unjust disadvantage, and stops trading with a party that does not accept it, this may be a problem under the Antimonopoly Act.

In other words: “whom to trade with” is in principle free. But if a buyer in a stronger position unilaterally imposes a remarkably low price and stops trading with a party that does not accept it, that can be an abuse of a superior bargaining position and a problem under the Antimonopoly Act.

The unilateral announcement is especially problematic.

しかし、課税事業者になるよう要請することにとどまらず、課税事業者にならなければ、取引価格を引き下げるとか、それにも応じなければ取引を打ち切ることにするなどと一方的に通告することは、独占禁止法上又は取適法上、問題となるおそれがあります。［8］

Reference translation (unofficial): However, going beyond asking the other party to become a taxable business, unilaterally announcing that the transaction price will be lowered unless it becomes a taxable business, or that the transaction will be ended if it does not accept that, may be a problem under the Antimonopoly Act or the Toriteki Act.

The Toriteki Act is the Act on the Prevention of Delay in Payment, etc. to Small and Medium-sized Contractors Relating to Manufacturing Commissions, etc.［8］. It is the law whose title and content were revised from the former Subcontract Act (Shitauke Act)［11］. It prohibits a commissioning business from reducing the price or forcing down the price against a small or medium-sized contractor［8］［11］. It covers transactions that count as manufacturing commissions, repair commissions, information-product creation commissions, service provision commissions, and specified transport commissions［8］. In addition, the capital or number of employees of the commissioning business and the small or medium-sized contractor must each meet the standards set by the law［11］.

In May 2023 (Reiwa 5), the Japan Fair Trade Commission published cases in which it actually issued cautions. Its thinking is as follows.

発注事業者（課税事業者）が、経過措置により一定の範囲で仕入税額控除が認められているにもかかわらず、取引先の免税事業者に対し、インボイス制度の実施後も課税事業者に転換せず、免税事業者を選択する場合に、消費税相当額を取引価格から引き下げるなどと一方的に通告することは、独占禁止法上又は下請法上問題となるおそれがあります。［9］

Reference translation (unofficial): Even though the transitional measure allows an input tax credit within a certain range, if an ordering business (a taxable business) unilaterally announces to a tax-exempt trading partner that, if it does not convert to a taxable business after the invoice system takes effect and chooses to remain tax-exempt, the amount equivalent to consumption tax will be deducted from the transaction price, this may be a problem under the Antimonopoly Act or the Subcontract Act.

(Excerpt. "Subcontract Act (Shitauke Act)" corresponds to the current Toriteki Act)

The cautions involved, for example, an illustration production business and an illustrator, and a processed agricultural product manufacturer and seller and a farmer［9］.

To sum up, the dividing line is this.

• Asking a business to become a taxable business = not a problem in itself
• Both sides agreeing on a revised price after considering the consumption tax on the tax-exempt business’s purchases and expenses = no problem
• Unilaterally announcing “if you don’t register, we will cut the price and stop trading,” or setting a remarkably low price only for the buyer’s convenience = may be a problem under the Antimonopoly Act or the Toriteki Act［8］

If you are in trouble, you can use the consultation desks of the Japan Fair Trade Commission and the Small and Medium Enterprise Agency［8］.

The cases of A and B

Now let’s look at the options concretely with two fictional people. Both are businesses with sales of ¥10 million or less, and both were tax-exempt before registration. The consumption tax amounts below are calculated at 10%, including local consumption tax.

A registered when the system started (October 2023, Reiwa 5). A’s annual sales are ¥6 million (excluding tax), and the consumption tax on sales is ¥600,000. With the 20% special rule, A’s tax payable for 2026 (Reiwa 8) is only ¥120,000. For 2027 (Reiwa 9) and 2028 (Reiwa 10), the 30% special rule makes it ¥180,000. Because A can issue invoices, A’s corporate clients can deduct the full consumption tax. A keeps the price at ¥6 million excluding tax and bills the ¥600,000 consumption tax on top.

B has not registered and remains tax-exempt. B’s client small and medium-sized companies can deduct 70% of the consumption tax equivalent on their purchases under the transitional measure. B’s annual sales are ¥5 million (excluding tax). The consumption tax equivalent is ¥500,000, so the clients’ burden is the 30% portion, ¥150,000. For 2027 (Reiwa 9), B’s tax payable if B registered and the clients’ burden if B stays tax-exempt are both ¥150,000 a year. If a client asks B to register, B can think as follows.

• If B registers: the tax payable is 20% of the consumption tax on sales (20% special rule, up to the 2026 (Reiwa 8) tax year) or 30% (30% special rule, 2027 (Reiwa 9) and 2028 (Reiwa 10) tax years). At 30%, it is ¥150,000 a year. B negotiates whether the consumption tax can be added to the price
• If B stays tax-exempt: the clients’ burden is ¥150,000 a year (during the 70% deduction period; the burden grows as the percentage falls). There is room to adjust that amount through price negotiation

If a client refuses to negotiate and unilaterally announces “unless you register, we will cut your price by the full consumption tax amount,” that is the kind of conduct that may be a problem under the Antimonopoly Act or the Toriteki Act, as we saw in the previous chapter (“Where ‘stopping the transaction’ becomes a problem”). B can consult the Japan Fair Trade Commission’s consultation desk and others.

It cannot be said across the board which of A or B is right. The answer changes with the type of customers, the deemed purchase rate for the industry, and the room for price negotiation.

What to do

When a tax-exempt business is thinking about registering, we recommend checking in the following order.

Businesses on the buying (ordering) side have the following options.

The small-amount special rule does not depend on whether the trading partner is an invoice issuer. It can be used for purchases from tax-exempt businesses as well. Whether a purchase is under ¥10,000 is judged by the amount including tax for a single transaction［7］. Without changing the partner, you may be able to deduct the full amount under the special rule.

少額特例とは、少額（税込1万円未満）の課税仕入れについて、インボイスの保存がなくとも一定の事項を記載した帳簿の保存のみで仕入税額控除ができる制度をいいます。［7］

Reference translation (unofficial): The small-amount special rule is a system under which, for small-amount taxable purchases (less than ¥10,000 including tax), an input tax credit can be taken just by keeping books that state certain items, even without keeping an invoice.

Finally, a point that matters for both sellers and buyers. If you are told “we won’t deal with you unless you register,” check the reason for the client’s request before agreeing on the spot. If it is a reasonable discussion, you can decide together how to respond. If it is a unilateral announcement, consultation desks are available.

Summary

“If you don’t register for the invoice system, your transactions will be stopped” is half true. Registration is left to each business’s judgment, and the law does not order transactions to be stopped either.

On the other hand, it is true that clients under the general taxation method cannot receive the full input tax credit on purchases from unregistered businesses. The transitional measure lets them deduct 70%. The percentage will fall to 50% and then 30%. For the portion of the burden that remains, you may in reality be approached about registration or price.

That is why this is a question of calculating and choosing for yourself between registering and staying tax-exempt. Sellers have the 20% special rule, the 30% special rule, and simplified taxation, and buyers have the small-amount special rule. Depending on the difference in position and the nature of the transaction, a unilateral announcement such as “we will stop trading with you” can become a problem under the Antimonopoly Act or the Toriteki Act. Before judging by rumor alone, check the text of the law, the official information, and your own numbers.

Sources

• ［1］Consumption Tax Act, Article 57-2 (e-Gov Law Search, Japanese)　Checked: 2026-10-04
• ［2］Consumption Tax Act, Article 9 (e-Gov Law Search, Japanese)　Checked: 2026-10-04
• ［3］e-Gov Law Search, Consumption Tax Act, Supplementary Provisions (Act No. 15 of March 31, 2016), Articles 52 and 53 (Japanese)（In the law page, see the section “Supplementary Provisions (Act No. 15 of March 31, 2016 (Heisei 28))”)　Checked: 2026-10-04
• ［4］NTA, “Special feature on the fiscal 2026 (Reiwa 8) tax reform (review of the invoice transitional measures, etc.) (Japanese)”　Checked: 2026-10-04
• ［5］NTA, “About the invoice system (Japanese)”　Checked: 2026-10-04
• ［6］NTA, “Q&A on the consumption tax invoice system and reduced tax rate system,” Q116 (PDF, Japanese)　Checked: 2026-10-05
• ［7］NTA, Tax Return Preparation Corner (2025 (Reiwa 7) tax year), Frequently Asked Questions, “What is the small-amount special rule?” (Japanese)　Checked: 2026-10-05
• ［8］Japan Fair Trade Commission and others, “Q&A on how tax-exempt businesses and their trading partners should respond to the invoice system (Japanese)”　Checked: 2026-10-04
• ［9］Japan Fair Trade Commission, “Cautionary cases related to the implementation of the invoice system” (PDF, Japanese)　Checked: 2026-10-04
• ［10］e-Gov Law Search, Consumption Tax Act, Supplementary Provisions (Act No. 15 of March 31, 2016), Article 51-2 (Japanese)（The location of the supplementary provisions is the same as in ［3］）　Checked: 2026-10-05
• ［11］Act on the Prevention of Delay in Payment, etc. to Small and Medium-sized Contractors Relating to Manufacturing Commissions, etc. (Toriteki Act), Articles 2 and 5 (e-Gov Law Search, Japanese)　Checked: 2026-10-05

Note: This article is based on laws and official information as of October 5, 2026. It is a translation of the Japanese original; if the two differ, the Japanese version prevails. Quotations from laws and official sources are given in the original Japanese, followed by unofficial reference translations. Sources are limited to laws (e-Gov) and official pages of the NTA and the Japan Fair Trade Commission, all in Japanese. If a correction is needed after publication, a correction record will be added at the end of this article (Correction policy).