I covered the move from the current method of preserving books and other records to the invoice system (the qualified invoice-based method) in a previous article.
Until now, the method for calculating consumption tax was to calculate the consumption-tax amount on the tax return. In this case, rounding was not much of an issue, but it was a major concern for businesses using the accumulated method of calculation.
Here, as a review, let me explain how much of a difference rounding alone can make to profit under the current consumption-tax system.
Explaining the Difference in Tax Payable Caused by Consumption-Tax Rounding
Example: A case in which 100,000 items priced at 100 yen including tax are sold
Standard Method (Multiplying the Tax Base by the Consumption-Tax Rate)
(100 yen × 100,000 items) × 1/(1 + 8%) × 8% = 740,000 yen (rounded down to the nearest 1,000 yen)
Special Treatment Under the Accumulated Method (Accumulating Individual Consumption-Tax Amounts)
ROUNDDOWN(100 yen – (100 yen ÷ 1.08 )) × 100,000 items = 700,000 yen
Because consumption tax is calculated and rounded down for each transaction, when a 100-yen item is sold, consumption tax is calculated at 7 yen per item.
The Accumulated Method of Calculating Consumption Tax Is More Advantageous
With the accumulated method, the tax payable was 40,000 yen less on tax-inclusive sales of 10 million yen. That amount directly increases profit, so it is a gain of 40,000 yen. As the scale grows, the profit also grows dramatically.
In the past, banks were criticized for the enormous profits generated by calculating and rounding consumption tax on ATM fees for each individual transaction.
Even now, many companies use the special treatment for accumulated-method calculations.
However, there are restrictions on using the accumulated method, so please check the National Tax Agency criteria (Japanese) in advance. It is permitted when calculations are made for each receipt or when an old cash register is used.
Advantages and Disadvantages of Consumption-Tax Rounding Under the Invoice System
The consumption tax you remit is the difference between the consumption tax you collect and the consumption tax you pay.
Under the invoice system, input tax credits are claimed based on invoices, so gains or losses do not arise in the first place from rounding up or rounding down.
The specific system design has not yet been decided, so it is unclear; however, if the current treatment continues for consumption tax received on sales, it may be necessary to think carefully about rounding up and down in order to determine the advantages and disadvantages.