History of the Japanese Consumption Tax Regime (1989-2014)

The Japanese Consumption Tax (JCT) has undergone significant transformations since its inception in 1989. This article aims to trace the evolution of the JCT, culminating in the introduction of the Qualified Invoice System in 2023, a critical change for businesses operating in Japan, particularly foreign enterprises.

Early Stages of the Japanese Consumption Tax

The journey of Japan’s consumption tax began in 1989 with a modest tax rate. Over the years, this rate experienced gradual increments, reflecting Japan’s changing economic landscape and policy objectives. Each increment marked a shift in the country’s approach to taxation and had broad implications for businesses and consumers alike.

Changes and Challenges in the Tax System

A significant development occurred in 2019 with the implementation of a multiple JCT rate system. This change introduced different rates for various items – a standard rate of 10% and a reduced rate of 8% applicable to most food and beverages, along with certain print newspaper subscriptions. While this tiered system aimed to address specific economic goals, it brought complexities in tax accounting, especially for businesses grappling with categorizing goods and services accurately under the respective tax rates.

Move Toward the Qualified Invoice System

The intricacies and challenges prompted by the multi-rate system set the stage for a more structured approach to tax invoicing. In October 2023, Japan took a decisive step by introducing the Qualified Invoice System. This system was designed to enhance the transparency and efficiency of the JCT regime, drawing inspiration from similar systems in VAT and GST-implementing countries.

Implementation of the Qualified Invoice System

Under the new system introduces a few changes:

  • Registration: Businesses were required to register as qualified invoice issuers, a critical step to ensure compliance.
  • Retention of Qualified Invoices: For JCT taxpayers, retaining qualified invoices became essential to claim input credit, a shift from the earlier, more flexible approach.
  • Invoice Requirements: The information required on tax invoices saw an update, mandating details like supplier’s name and registration number, transaction date, and clear delineation of JCT rates.

Read more about the QIS in What is the Qualified Invoice System in Japan?

Business Implications and Compliance Challenges

These changes had profound implications for businesses, especially those from abroad. The need to align IT systems with the new invoicing requirements, renegotiate contracts to accommodate the revised JCT structures, and reevaluate operational processes became paramount. These tasks represented not just compliance activities but a broader transformation in how businesses engaged in financial transactions and reporting.


Understanding the history and evolution of Japan’s consumption tax regime is crucial for businesses operating in the country. The transition to the Qualified Invoice System in 2023 marks the latest phase in this ongoing journey. For foreign businesses in Japan, adapting to these changes is not just a matter of regulatory compliance but a strategic imperative to ensure continued operational efficiency and financial integrity in a complex and evolving tax environment.

Of course, the authoritative source of anything related to taxation is the National Tax Agency.