Japan Deductible Purchase Tax: New Rate Options for October 2026 Invoice Issuer Amendments

What changed

Beginning October 2026, Japan's transitional measures for tax credits on taxable purchases from parties other than qualified invoice issuers are being amended. To support this, the Tax Deductible field on tax code records now includes the following purchase tax rate options:

• 80%
• 70%
• 50%
• 30%
• 0%

These rates determine what percentage of the transaction tax amount is deductible. This is part of the phased reduction in purchase tax credits for transactions with non-qualified invoice issuers under Japan's Qualified Invoice System.

The feature is delivered through the Japan Localization SuiteApp and applies to Japan subsidiaries only.

Affected transactions

The following transaction types can carry deductible purchase tax:

• Purchase Orders (including expenses on the Expense subtab when Allow Expenses on Purchases is enabled)
• Vendor Bills
• Vendor Returns
• Vendor Credits
• Journal Entries
• Expense Reports

The deductible rate is applied per line via the Tax Code field on:

• Line items on the Expenses and Items subtabs of purchase transactions
• Line items on the Expenses subtab of expense reports
• Debit/credit lines on the Lines subtab of journal entries
• Items/expenses on the Lines/Expense subtabs of purchase orders

CSV import support

You can use CSV import to set or update the Account, Tax Codes, and Amount fields on the item and expense sublists of all supported purchase transactions.

Important caveat for journal entries and expense reports: If your CSV file explicitly sets Amount, Tax, and Gross Amount, you must disable both Run Server SuiteScript and Trigger Workflows in the CSV import Advanced Options. Failing to do so will cause server-side scripts to recalculate values and potentially override your explicit amounts.

Constraints and gotchas

• Tax Groups not supported. You must use individual Tax Codes — deductible purchase tax is not available on tax groups.
• Rounding: The tax agency only accepts Round Down or Round Off for transactions with deductible purchase tax rates. Do not use Round Up. Configure this at Setup > Accounting > Tax Codes or via the Japan tax rounding settings.
• Consumption Tax Form: Deductible purchase tax calculations are not yet included in the appendices of the Japan Consumption Tax Form. Plan for manual reconciliation until Oracle updates the form.

What to do

1. Enable required features if not already active: A/P, Purchase Orders, Vendor Returns, and Expense Reports.
2. Update tax codes: Navigate to Setup > Accounting > Tax Codes. Edit each applicable Japan tax code (standard rate and reduced rate) and set the Tax Deductible field to the correct rate for your invoice-issuer status (80%, 70%, 50%, 30%, or 0%).
3. Review existing transactions: Ensure purchase transactions reference tax codes (not tax groups). If you are currently using tax groups on purchase transactions, migrate to individual tax codes.
4. Audit rounding settings: Confirm your Japan tax rounding method is set to Round Down or Round Off — not Round Up.
5. Update CSV import workflows: If you bulk-load journal entries or expense reports with explicit tax amounts, update your import templates to disable server SuiteScript and workflow triggers in Advanced Options.
6. Plan for manual reconciliation: Until the Japan Consumption Tax Form appendices are updated to include deductible purchase tax, you will need to reconcile these amounts outside the form.