Japan: Food Consumption Tax Could Fall from 8% to 1% from April 2027

Japan has approved an outline to temporarily cut the consumption-tax rate on qualifying food and beverages from 8% to 1% from April 1, 2027 to March 31, 2029. Retailers would face significant POS, pricing and accounting changes, but legislation must still pass the Diet (national parliament).

Japan’s Cabinet approved an outline on September 15, 2026 for a temporary reduction in the consumption-tax rate applicable to qualifying food and beverages. Under the plan, the current 8% reduced rate would fall to 1% for two years, from April 1, 2027 through March 31, 2029.

For retailers, supermarkets, food businesses and POS providers, the proposal would require more than a simple tax-rate update. Product classification, POS tax masters, price displays, invoices, accounting calculations and interim tax payments may all be affected.

The measure is not yet enacted legislation. The Cabinet decision establishes the government’s policy and implementation outline, while the necessary legislative measures still have to be submitted to and approved by the Diet. The Cabinet Secretariat expressly describes the September 15 outline as preparation for submitting legislation.

The planned 1% rate would apply to food and beverages that are currently within Japan’s reduced-rate system. The scope of qualifying products would therefore generally remain unchanged rather than creating a new food classification specifically for the temporary measure.

Under the existing system, qualifying food and beverages excluding alcoholic beverages are generally subject to the 8% reduced rate. Restaurant services and catering are excluded from the reduced-rate scope and are currently subject to the standard 10% consumption-tax rate.

This distinction would become considerably more important once the proposed 1% rate applies. A qualifying food product sold for takeaway could potentially be subject to 1%, while restaurant consumption of food would continue to fall under the 10% rate.

Retail and hospitality systems would therefore need to maintain accurate transaction classification. The proposal does not eliminate Japan’s multiple-rate environment; instead, it would temporarily increase the difference between the tax treatment of qualifying food sales and other taxable supplies.

The government also plans transitional treatment for certain transactions entered into before the rate change. Published details include special treatment for qualifying periodic supply arrangements and distance-sales transactions where contracts, sales conditions or orders pre-date specified transitional dates.

For retailers, one of the most immediate implementation areas would be the Point-of-Sale System.

Tax configurations would need to distinguish products subject to the temporary 1% rate from items remaining at 10%. Restaurants and businesses offering both dine-in and takeaway transactions would need particular attention because the same or similar food may continue to have different tax treatment depending on how it is supplied.

Receipt and invoice calculations, tax rounding, returns, refunds and accounting exports should also be reviewed to ensure that the temporary tax rate is correctly carried through the complete transaction lifecycle.

Pricing creates another practical issue. Japan generally requires consumer-facing prices to be displayed on a tax-inclusive basis. The proposed package therefore includes temporary relief where businesses cannot immediately replace all labels, printed materials or other price displays at the moment of the rate change. The existing obligation itself is not being abolished.

Impact on retailers, restaurants and software providers

The most direct impact would fall on supermarkets, convenience stores, food retailers, manufacturers and other businesses selling qualifying food and beverages. POS, ERP and accounting-system providers would also need to prepare for a temporary rate with a defined beginning and end.

Restaurants face a different issue. Restaurant services would remain subject to 10%, while qualifying takeaway food could benefit from the temporary 1% rate. The government has recognized that the widened tax-rate difference could affect food-service businesses and has included support considerations for restaurants, food businesses, agriculture and fisheries in the broader package.

System development should also account for the planned return from 1% to the existing rate after March 31, 2029, rather than treating 1% as a permanent tax configuration.

What should affected businesses do now?

Retailers and solution providers should not yet treat the 1% rate as enacted legislation. They should, however, begin assessing which products and transaction types currently use the 8% food rate and identify the POS, ERP, invoicing, accounting and price-display components that would require modification if the bill is adopted.

Businesses using simplified taxation or the small-business exemption should also review the proposed special measures with their tax advisers rather than assuming their current tax calculation will continue unchanged.

From a retail compliance perspective, the main complexity is the combination of a large but temporary rate reduction with an unchanged product-scope distinction. Retail systems will need to apply the correct rate according to the transaction while also being capable of reversing the temporary configuration in 2029.

The official source for this article is the official Tax Authority website. Source

Ivana Picajkić, Medior Legal Consultant at Fiscal Solutions

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