1. "3-minute" grasp: List of revisions in the "FY2026 Tax Reform Proposal" for accounting and finance departments

To get an overall picture, we have compiled a list of revisions that are likely to affect accounting and finance operations.

*Guideline of practical impact
Large: Requires system modification or major changes in workflow
Medium: Requires changes in settings or modification of operational rules
Small: Confirmation work or minor changes only

Other Revision Topics to Keep in Mind

In addition to the items directly related to accounting and finance mentioned above, the report also includes key issues that are indispensable for understanding the overall picture of the "FY2026 Tax Reform". Please check it out as well.

Main Pillars of the Outline (Issues with Major Social Impact)

• Individual Income Personal income: Price indexing of basic tax deduction, stricter energy conservation for mortgage deduction, expansion of NISA, taxation of wealthy individuals, etc.

• Assets & Consumption Consideration of a fundamental review of the automobile tax system (e.g., abolition of the environmental performance discount) and an increase in the departure tax.

• International/Defense Discussions on the timing of enacting a global minimum tax and starting a defense tax hike (additional income tax).

• Tax Payment Environment Digitalization of tax filing procedures and tariff revision from the perspective of economic security.

Individual system issues (issues related to practice and systems) 

• Meal subsidy : Changes in tax exemption limits/requirements. Must be confirmed as it is directly related to the tax exemption limit setting for the payroll system.

• Wage Taxation Establishment of a "tax credit carry-forward" that can be used even in the event of a deficit. Review of the decision flow for applicability is necessary.

• Entertainment expenses Confirmation of whether or not the "10,000 yen standard" for business entertainment expenses can be extended.

Reference: Ministry of Finance "Outline of the Fiscal 2026 Tax Reform Proposal"
https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.pdf

2. Noteworthy issues that will change practice

Of the above list, we will take an in-depth look at four issues that have a particularly large impact on the business processes and core system (ERP) setup of the accounting and finance departments.

2-1 [Change in tax benefits for large investments] Promotion of bold capital investments (e.g., tax credits for promoting domestic production in strategic areas)

Investment tax breaks in certain strategic sectors (semiconductors, storage batteries, green steel, etc.) will be significantly strengthened with the aim of returning to the domestic market and enhancing industrial competitiveness.

Accounting and financial operations likely to be affected

• Formulation of capital investment plan and forecasting and actual management (cash flow calculation)

• Registration of tax information in the fixed asset ledger (determination of special depreciation and tax credits)

• Preparation of annexes for corporate tax returns

Key points of the revision

Unlike the previous measures, which were limited to certain industries, the "production-linked" support measures will be expanded to provide tax credits in proportion to production and sales volumes.

• Subject : Semiconductor, EV (Electric Vehicle), GX (Green Transformation) related equipment, etc.

• Advantages : In addition to the depreciation benefit for the initial investment, tax credits will be available for production activities over a long period of time, which is expected to shorten the payback period of the investment.

Practical Impact (Business Flow/System) 

Accounting departments will be required to cooperate with business divisions from the investment planning stage, and it will become more important to conduct simulations to determine "whether tax-qualification requirements are met. In terms of systems, fixed asset management systems must be set up to clearly separate and manage (segment and tag) assets that are eligible for this taxation from those that are not, and to support tax credit logic that differs from normal depreciation calculations.

Points to keep in mind 

In many cases, prior planning approval is required in order to apply the system, so schedule management prior to the start of construction or placing of orders is critical.

2-2. [Change in the calculation of tax credits for purchases] Revision of the transitional measures for the invoice system

The transitional measure after the start of the invoice system ("deemed deduction" for purchases from tax-exempt businesses) will reach the end of the "80% deduction" at the end of September 2026. Since the deduction rate will be gradually reduced after October 2026, it is necessary to prepare both in terms of inventory of actual transactions and systems and operations.

Accounting and financial operations likely to be affected

• Supplier (vendor) master management and maintenance

• Confirmation of business registration number and input of tax classification upon receipt of invoice

• Calculation and reporting of consumption tax credit for purchases

Key points of the revision

• Change in deduction rate The deduction rate for taxable purchases from tax-exempt businesses will be reduced in stages to 70% from October 1, 2008, 50% from October 1, 2010, and 30% from October 1, 2030 to the end of September, 2031.

• Revision of Annual Applicable Limit The annual maximum amount of purchases for each tax-exempt business will be reduced from 1 billion yen to 100 million yen.

Practical Impact (Business Flow/System) 

In accounting and expense reimbursement systems, the deduction rate for tax-exempt purchases must be changed in stages from 80% to 70% (from October 2026) to 50% (from October 2028) to 30% (from October 2030 to the end of September 2031) according to the transaction date (time of taxable purchases). In particular, transactions in which services are provided across months, transactions in which acceptance inspection dates are delayed, and invoices with a gap in the closing date can easily lead to errors in determining which tax deduction rate is applicable.
At the same time, since it is necessary to determine the annual limit of 100 million yen for each tax-exempt business, it is also important to check the linkage between supplier master and transaction tally (same business name, unified supplier code) as soon as possible.

Points to keep in mind 

In addition to system modifications, there is a possibility that the review of transaction prices with tax-exempt businesses (e.g., negotiations for discounts equivalent to the consumption tax) may reoccur. In cooperation with the legal and purchasing departments, it is necessary to fix a negotiation policy in view of the timing of contract renewal (by the end of September).

Changes in the preservation of vouchers for intra-group transactions: Group totalization system and preservation of vouchers for intra-group transactions.

Companies that have adopted the group totalization system and corporate groups with global operations are required to strengthen tax governance for intra-group transactions (provision of services and loans of funds).

Accounting and financial operations likely to be affected

• Billing and payment between group companies (management guidance fees, royalties, etc.)

• Support for preparation of transfer pricing documents (local files, etc.)

• Support for Electronic Bookkeeping Law (linking of vouchers)

Key points of the revision 

The obligation to preserve documents that clarify the basis for calculating the amount of consideration (fees and interest rates) for "provision of services (management guidance, shared services, etc.)" and "loan of funds" between group companies will be clarified and made stricter.

• Items to be preserved Details of services provided Details of services provided, time required (time sheets), cost allocation criteria, basis for determining markup ratio (profit margin), etc.

• Risks : Failure to properly preserve these items increases the risk of non-deductible expenses due to donation recognition.

Practical Impact (Business Flow/System) 

In the past, intra-group transactions could be simply invoiced or detailed simply because they were between parent and subsidiary, but from now on, detailed information (evidence) equivalent to or better than that for external transactions will be required. In the accounting system, a thorough workflow is required to ensure that Excel or contract PDF files that serve as the basis for calculation are attached to and saved with journal entries for inter-group transactions.

Points to keep in mind 

In particular, "allocation of head office expenses (management fees)" is a point that is likely to be pointed out during a tax audit. It is recommended that the allocation logic in the system itself be documented so that a third party can explain "why the amount is the way it is".

2-4. [Changes in consumption tax calculation and reporting for small-value imports] Introduction of platform taxation and revision of small-value import tax exemption

With the expansion of cross-border EC (purchase of goods through overseas platforms, etc.), "platform taxation" etc. will be introduced to maintain fairness in taxation.

Accounting and financial operations likely to be affected

• Confirmation of reimbursement of overseas expenses (cloud services, equipment purchases, etc.)

• Treatment of import consumption tax

• Determination of application of reverse charge method

Key points of the revision

• Expansion of platform taxation : A system will be established whereby PF businesses will be liable for consumption tax payment on behalf of foreign businesses when they sell digital services or goods via a digital platform (PF).

• Review of Import Tax Exemption Exemption of small import shipments (10,000 yen or less)" used for personal imports, etc., will be revised in terms of the scope of exemptions, etc.

Practical Impact (Business Flow/System) 

When employees purchase equipment on overseas sites (e.g., Amazon.com and other overseas versions of Amazon.com, AliExpress, etc.), there will be more cases where the invoice source will be changed to the "platform operator" instead of the "overseas seller". In the expense reimbursement system, it will be more difficult to confirm who is the issuing entity of the invoice (qualified invoice) received and to select the appropriate tax category (taxable/non-taxable/reverse charge).

Points to keep in mind 

The question of "who is the taxpayer (who should receive the invoice from whom)" will become more complicated. Accounting rules for the use of overseas PFs will need to be compiled into a manual and communicated to employees.

3. Preventing omissions: 3 initial steps

The FY2026 revision includes many items that require system modification and data maintenance. The following three steps should be taken as early as possible.

(1) Inventory of relevant items (trial calculation of the impact)

First, pick up the items related to your company from the aforementioned table and estimate the specific "monetary impact. For example, if it is an invoice, calculate the "annual amount paid to tax-exempt businesses," and first calculate how much the cost burden will increase due to the most recent change in the deduction rate (from 80% to 70%). The purpose is not to merely "confirm the system" but to solidify a "numerical basis" for requesting management and other departments to secure budgets and take action.

(2) Confirmation of system impact points (ERP, tax classification, calculation logic)

The system will need to reflect the addition of tax categories for "transitional measures (70%/50%/30%)" for consumption tax, the decision logic for the "100 million yen ceiling on purchases," master maintenance for the new categories of the fixed asset tax system, support for special calculations, and a voucher management function to securely link journal entries for intergroup transactions with the calculation basis, etc. across tax categories and operations. The system must be able to reflect this across tax categories and business operations. Check to see if the system used by the company can handle these functions.

(3) Discuss with the relevant departments (determine the division of roles and schedule)

The accounting department alone is not sufficient to deal with revisions. In addition to internal collaboration, such as with the Corporate Planning Office for investment plans and the Purchasing Department for invoices, it is essential to consult with external specialists such as tax advisors and auditing firms to determine the applicability of the new taxation system and the validity of vouchers. It is important to clarify the roles of the experts in interpreting the law and the field in implementing business operations, and to establish a schedule that works backward from the effective date with the involvement of both internal and external parties.

Responding to the revision is not just a matter of legal compliance; it is also an opportunity to promote the digitization and standardization of business processes. HUE and HUE Classic, integrated enterprise resource planning (ERP) systems for large companies HUE and HUE Classic AC series HUE and HUE Classic AC series, integrated enterprise resource planning (ERP) systems for major companies, are scheduled to sequentially provide functions to comply with the changes in the rate of invoice transitional measures required by the 2026 tax system revision and the requirements of the Electronic Bookkeeping Act. Having a robust system infrastructure that can keep up with changes in laws and regulations will allow the accounting department to focus on high value-added operations.

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