Introduction
Japan’s Qualified Invoice System (QIS), first introduced in October 2023, is entering its most consequential phase yet. Under the Reiwa 8 tax reform, the government has revised the transitional input tax credit (ITC) rules that govern how much Japanese Consumption Tax (JCT) buyers can deduct on purchases from unregistered, tax exempt suppliers. Instead of the originally planned drop to 50%, the deductible portion will fall to 70% from October 1, 2026, and the phase out timeline has been extended by two years. For any company running an ERP system in Japan, whether SAP, NetSuite, or Microsoft Dynamics 365, this is not a minor accounting footnote. It is a system level change that touches tax codes, general ledger logic, supplier master data, and document retention all at once.
This blog will cover the following points
- What the October 2026 QIS deadline actually changes
- The revised transitional tax credit roadmap through 2031
- Four critical ERP checkpoints every finance and IT team should audit
- A practical step by step action plan for enterprises
- Why the right ERP partner matters, and how Sysamic can help
What Changes on October 1, 2026
Since 2023, buyers have been able to claim an 80% JCT input credit on invoices from suppliers who are not registered as Qualified Invoice Issuers. That 80% window closes on September 30, 2026. From October 1, 2026, the deductible credit drops to 70%, a change from the original plan of 50%, reflecting the government’s attempt to ease the burden on supply chains while still tightening compliance over time. The full revised roadmap looks like this: 80% credit until September 30, 2026; 70% from October 2026 to September 2028; 50% from October 2028 to September 2030; 30% from October 2030 to September 2031; and 0% credit, meaning full compliance is required, from October 2031 onward.
Many finance teams assume their ERP tax tables are already current. In practice, a large number of systems still have the old 50% rule hardcoded from the original 2023 legislation, which means invoices processed after October 1, 2026 could be miscalculated unless the tables are updated in advance.
Four Critical ERP Checkpoints for October 2026
IT and finance teams should audit four core ERP functionalities before the deadline. First is dynamic tax code configuration: Accounts Payable and procurement modules must distinguish between registered suppliers, who qualify for a full deduction through a 13 digit corporate T-Number, and unregistered suppliers, whose invoices need a dedicated tax code routing 70% of the standard 10% JCT to the input tax account and the remaining 30% to an expense account. Second is master data and automated T-Number validation, since manually checking registration status is inefficient at scale; the ERP or an integrated OCR tool should validate each supplier’s JCT registration number against the National Tax Agency database and automatically trigger the 70% logic when a T-Number is missing or invalid. Third is bookkeeping note compliance, because the NTA requires the general ledger to automatically generate a note or flag on each journal entry confirming that the transitional measure applies. Fourth is Peppol JP PINT and Electronic Record Retention Act (ERRA) readiness, since e-invoicing remains voluntary but is increasingly expected by major Japanese buyers, and ERRA mandates immutable, searchable digital archiving rather than printed records.
A Step by Step Action Plan
Enterprises with limited time before the deadline should move through four stages. Start by extracting supplier data through an ERP report to flag every vendor who is unregistered or missing a T-Number. Next, liaise with your ERP vendor to confirm localization patches are scheduled, since platforms like Dynamics 365 Business Central and SAP S/4HANA require time dependent tax updates before late September. Then adjust general ledger expense routing so the 30% non-deductible gap does not create monthly reconciliation errors. Finally, run user acceptance testing with mock invoices dated after October 1, 2026, to confirm tax splits and archiving both work correctly.
How Sysamic Can Help
At Sysamic, we specialize in localizing Microsoft Dynamics 365 Business Central and Finance & Operations for Japan’s accounting and tax rules, from consumption tax configuration and qualified invoice validation to J-GAAP compliant charts of accounts and e-Tax integration. We have supported foreign enterprises and Japan based companies through the 2023 invoice system rollout, and we are already helping clients update tax tables, supplier master data, and GL routing ahead of the October 2026 changes. If your team needs a readiness review or ERP configuration support before the deadline, reach out to Sysamic and we will help you get compliant without disrupting your monthly close.