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100% Free Online ConsultationIf you’re running a minpaku (private lodging) business, there comes a point when you start wondering, “Am I about to become liable for consumption tax?” The rules around consumption tax for minpaku operators change significantly once your annual sales cross the 10-million-yen mark. Handling this transition incorrectly can lead to missed filings and back taxes, so it’s essential to understand how the system works well before you get there.
This article walks through the fundamentals of consumption tax as it applies to minpaku operations, the conditions that make you a taxable business, and the practical steps to take once your sales exceed 10 million yen—all illustrated with concrete numbers. Whether you’re running a single property solo or managing multiple listings, this guide has something useful for you.
The Basics of Minpaku and Consumption Tax
Income from minpaku accommodation fees is, in principle, subject to consumption tax. While renting out residential property can sometimes be tax-exempt, operating a minpaku as a lodging service counts as “provision of services,” which makes it a taxable transaction. Income earned through Airbnb or other OTAs (online travel agencies) is treated the same way—as taxable sales.
You become liable to pay consumption tax once your “taxable sales during the base period (the taxable period two years prior)” exceed 10 million yen. For sole proprietors, the base period runs from January 1 to December 31 of two years earlier. For example, if your 2024 sales come to 11 million yen, you’ll become a taxable business starting in fiscal year 2026, with obligations to file and pay consumption tax. Since you’re generally treated as a tax-exempt business for the first two years after starting your operation, it’s crucial to keep meticulous sales records during this window.
Tax-Exempt vs. Taxable Businesses: What’s the Difference?
What Is a Tax-Exempt Business?
Businesses whose taxable sales during the base period come to 10 million yen or less are classified as “tax-exempt businesses” and are not required to pay consumption tax. This applies to those who have just started their minpaku operation, or whose annual sales haven’t yet reached 10 million yen. As a tax-exempt business, you’re not obligated to remit to the government the consumption tax amount collected from guests—you can simply keep it as part of your income.
That said, tax-exempt businesses have one notable drawback: they cannot issue qualified invoices (インボイス). If you want to attract corporate business-travel demand, or if an OTA requires invoices to claim input tax credits, you may need to consider registering as a qualified invoice issuer. Keep in mind that doing so automatically makes you a taxable business, meaning you’ll be obligated to file consumption tax returns regardless of your sales volume.
What Is a Taxable Business?
Once your taxable sales during the base period exceed 10 million yen, you become a taxable business starting two fiscal years later. As a taxable business, you pay the government the difference between the consumption tax included in your sales (output tax) and the consumption tax you paid on purchases and expenses (input tax). This mechanism is known as the “input tax credit.”
For example, if your annual sales total 12 million yen (including roughly 1.09 million yen in consumption tax) and you paid 400,000 yen in consumption tax on expenses, you’d owe approximately 690,000 yen in consumption tax. If this is your first time becoming liable to pay consumption tax, it’s worth revisiting your cash flow management. Setting aside your consumption tax portion in a separate account is a good habit that helps you avoid a cash crunch at filing time.
Steps to Take Once Annual Sales Exceed 10 Million Yen
Accurately Tracking Your Taxable Sales
First, you need an accurate picture of your taxable sales. Minpaku sales can be checked through your OTA dashboard or bank transfer records, but pay close attention to how “service fees (commissions)” charged by OTAs are treated. On platforms like Airbnb, the amount a guest pays and the amount a host receives can differ. Generally, the amount actually received by the host (after fees) is used as the basis for taxable sales calculations, but this can vary depending on contract terms—so it’s best to confirm the details with a tax accountant.
If you operate multiple properties, sales across all of them are combined for the determination. For instance, if Property A earns 6 million yen and Property B earns 5 million yen, the combined total of 11 million yen would make you a taxable business starting two fiscal years later. Remember that the assessment is made at the business-operator level, not per property.
Filing the Notification of Taxable Business Status
If your taxable sales during the base period exceed 10 million yen, you automatically become a taxable business—but you’re also required to submit a “Notification of Taxable Business Status for Consumption Tax” to your local tax office. This notification informs the tax office of your new status. While a delay in submission doesn’t change your obligations as a taxable business, filing promptly helps you avoid the risk of missed reporting.
The notification form can be downloaded from the National Tax Agency’s website and can also be submitted via e-Tax (electronic filing). The deadline is the day before the start of the taxable period in which you become a taxable business. For sole proprietors, this generally means by December 31 of the year before you become taxable. If you’re unsure about the procedure, working with a tax accountant is the safest route.
Checking Your Consumption Tax Filing and Payment Schedule
Once you become a taxable business, you’ll need to file and pay consumption tax separately from your income tax return. For sole proprietors, the consumption tax filing deadline is March 31 of the following year—different from the income tax filing deadline of March 15, so be careful not to confuse the two. Payment methods include bank transfer, convenience store payment, and direct payment via e-Tax.
There are two ways to calculate consumption tax: the “standard taxation method” and the “simplified taxation method.” The simplified method is available to businesses whose taxable sales during the base period are 50 million yen or less, and it calculates tax owed using a deemed purchase rate. Since minpaku falls under the service industry category, the deemed purchase rate is 50%. For example, with taxable sales of 12 million yen, the consumption tax due would be calculated as: 12,000,000 × 10% × (1 − 50%) = 600,000 yen. Which method is more advantageous depends on your actual expense structure, so it’s strongly recommended that you consult a tax accountant before choosing—ideally before you even start your business. Note that to elect the simplified taxation method, you must submit a “Notification of Election for the Simplified Taxation System for Consumption Tax” in advance.
Organizing the Tax Classification of Your Expenses
Once you become a taxable business, you can deduct the consumption tax paid on your expenses as an input tax credit. Common expenses in minpaku operations include cleaning fees, amenity costs, utilities, Wi-Fi rental fees, OTA commissions, and repair costs. Properly recording these expenses and managing them as taxable purchases allows you to appropriately reduce the amount of consumption tax you owe.
On the other hand, some payments—such as rent (for residential use) or insurance premiums—are exempt from or outside the scope of consumption tax. Treating all expenses uniformly as “eligible for input tax credit” is a mistake. Correctly distinguishing between taxable and non-taxable purchases in your day-to-day bookkeeping is the foundation of an accurate consumption tax filing. Using accounting software (such as freee or Money Forward Cloud) can significantly reduce the burden of managing these classifications.
How the Invoice System Affects Minpaku Operations
The Invoice System (Qualified Invoice Retention System), introduced in October 2023, also affects minpaku operations. Once you register as a qualified invoice issuer, you become obligated to file and pay consumption tax as a taxable business regardless of your sales volume. If you remain a tax-exempt business, you may run into situations where you can’t accommodate business partners (corporate guests or certain OTAs) that require qualified invoices.
For minpaku operators whose business is mainly focused on individual travelers, registering for the invoice system is often not urgent. However, if you’re actively trying to capture corporate business-travel demand, or depending on the terms of your OTA contracts, registration may effectively become necessary. It’s wise to weigh the pros and cons of registration against your own business model.
Key Points for Reducing Consumption Tax and Filing Correctly
Don’t Forget to Apply for the Simplified Taxation System in Advance
To elect the simplified taxation method, you must submit the notification form by the day before the taxable period you want it to apply to (for sole proprietors, this means by December 31 of the previous year). If you realize after becoming a taxable business that the simplified method would have been more advantageous, you won’t be able to switch until the following year at the earliest. As you see your sales approaching the 10-million-yen threshold, run simulations with a tax accountant comparing the standard and simplified methods, and decide whether to file the notification in advance.
While the deemed purchase rate for minpaku is 50%, if your actual taxable purchases—such as cleaning services and supply purchases—make up a larger share of your expenses, the standard taxation method may work out better for you. If you expect your annual taxable expenses to exceed 50% of your sales, there’s a good case for choosing the standard method instead.
Proper Sales Management and Bookkeeping
Accurately recording your daily sales and expenses is essential for filing consumption tax correctly. This is especially true for OTA-based sales, where the payment date and the booking date often don’t align—meaning you need to keep records based on accrual accounting. If you also receive cash payments, be sure to properly maintain a cash ledger.
You’ll also need to comply with bookkeeping retention requirements, including those under the Electronic Books Preservation Act. Since January 2024, electronic retention of electronic transaction data has been mandatory, so statements and receipt data from OTAs need to be stored in an appropriate format. Adopting cloud accounting software can help you automate record-keeping while also handling document retention requirements at the same time.
When to Consult a Tax Accountant
Determining consumption tax liability and handling the related notifications is an area where mistakes are easy to make without proper knowledge. This is especially true if you run a minpaku business alongside other ventures, where combining sales figures and determining business classifications can get complicated. Starting to consult a tax accountant once your annual sales reach around 7–8 million yen will help you prepare smoothly for the transition to becoming a taxable business.
For sole proprietors, annual tax accountant fees typically run around 100,000 to 300,000 yen. Given the tax savings from accurate filing and the risk of back taxes from filing errors, this is a cost well worth the investment. Partnering with a professional early on lays the groundwork for running your minpaku business sustainably over the long term.
If You Need Help with Minpaku Tax or Operations, Talk to Stay Buddy
Stay Buddy Inc., a full-service minpaku management company, provides comprehensive support for the many challenges minpaku owners face—from consumption tax questions to day-to-day operational management. Whether you’re unsure if you qualify as a taxable business, or your sales have grown and you don’t know where to start, we’re happy to help—just reach out.
As minpaku management professionals, Stay Buddy handles everything from guest acquisition, booking management, cleaning coordination, and guest support, to connecting you with tax and legal specialists as needed. We also have a track record of helping owners review their financial management and organize their bookkeeping in preparation for the transition to taxable business status.
Your first consultation is completely free. We’ll provide concrete advice to help you maximize your minpaku revenue while minimizing tax-related risks. No matter the size of your property or the stage of your operation, feel free to reach out to us first.
For any questions about minpaku management or to schedule a free consultation, please get in touch through the contact form on Stay Buddy Inc.’s official website. Our specialist staff will be happy to assist you.
