On October 1, 2023, Japan formally implemented the “Qualified Invoice System.” This tax reform mandates that businesses must use invoices of a specific format to claim Consumption Tax credits.
Facing this compulsory policy, the current user penetration rate for Qualified Invoices in Japan is only about 10%. This indicates that over 4 million enterprises urgently need to complete the transition from traditional invoices to Qualified Invoices.
01 Institutional Reform
Japan’s Qualified Invoice System represents a significant reform fundamentally altering how businesses conduct transactions and file taxes. Starting October 1, 2023, businesses must use “Qualified Invoices” that meet specific requirements as proof for claiming Consumption Tax credits.
The core change is this: Only businesses pre-registered as “Qualified Invoice Issuers” are authorized to issue such invoices. This marks the establishment of a stricter, more transparent tax management system.
Under the new system, to obtain input tax deductions, businesses must use standardized Qualified Invoices. Notably, the system’s definition of an “invoice” is quite flexible—receipts, purchase orders, delivery slips, etc., can all be considered Qualified Invoices as long as they meet the requirements.
Qualified Invoices are divided into two types: Standard Invoices and Simplified Invoices. The latter is primarily for industries like retail and food service that cater to non-specific customers, with differences mainly in the information required from the issuer.
| Element Comparison | Qualified Invoice (Standard) | Qualified Simplified Invoice |
| Issuer Information | Required | Required |
| Transaction Date | Required | Required |
| Transaction Details | Required | Required |
| Recipient Information | Required | Not Required |
| Issuer Registration Number | Required | Required |
The impact on small and medium-sized enterprises (SMEs) is particularly significant. Tax-exempt businesses with annual sales below 10 million yen face a dilemma: if they register as Qualified Invoice Issuers, they must start paying Consumption Tax; if they do not register, they cannot provide clients with deductible invoices, potentially leading to customer loss.
02 Market Scale
The implementation of the Qualified Invoice System coincides with the wave of digital transformation in Japan’s POS terminal market, jointly fostering a vast integrated hardware and software service market.
From the demand side, what businesses now need is no longer simple cash register equipment but intelligent, integrated solutions that seamlessly combine Qualified Invoice issuance with electronic storage and management functions. This directly drives the evolution of POS systems from “payment tools” to “intelligent business terminals.”
The Japanese POS market shows a trend of continuous growth. In 2024, sales of POS terminals in the Japanese market are projected to reach 114,000 units. Demand remains on an upward trend for full-featured POS devices supporting invoice printing, inventory management, image scanning, and mobile payments.
Globally, the POS printer market is steadily expanding. According to a QYResearch report, the global POS printer market size is expected to grow from approximately $3.094 billion in 2024 to $3.169 billion in 2025.
More importantly, the factors driving market growth have undergone profound changes. Analysis from Mordor Intelligence indicates that the expansion of the retail sector, the proliferation of cashless payments, and the rise of cloud-based POS solutions have become key drivers of market growth.
The table below analyzes the main drivers and their impact on the Japanese POS market:
| Main Drivers | Impact on Japanese Market | Timeline |
| Retail Expansion & Omnichannel Strategy | Drives integration of physical and online channels, creating demand for flexible solutions like mobile POS. | Ongoing |
| Cashless Payment Proliferation | Prompts businesses to upgrade payment systems, stimulating demand for POS terminals handling diverse payments. | Short-term (≤2 years) |
| Rise of Cloud & Mobile POS Solutions | Provides SMEs with cost-effective enterprise-level features, becoming a significant growth area. | Short-term (≤2 years) |
| Demand Growth in Verticals (e.g., Healthcare) | Integration of medical payments with electronic records streamlines processes, becoming a notably growing segment. | Medium-term |
| Regulatory Push (e.g., Qualified Invoice System) | Forces businesses to upgrade invoicing and data management capabilities, creating a huge market for replacing existing equipment and new purchases. | Medium-term (2-4 years) |
It is worth noting that regulatory pushes such as Fiscalization and mandatory e-invoicing requirements are explicitly listed as key drivers affecting the global POS terminal market. This indicates that Japan’s implementation of the Qualified Invoice System is part of this global wave of compliance, bringing certain growth to related hardware and software markets.
03 The Time Window
The Qualified Invoice System was not implemented overnight. The National Tax Agency (NTA) established a 6-year transition period (October 2023 – September 2029), and October 1, 2026, is a critical watershed within this period.
During the transition period, even if a purchasing company buys goods or services from an unregistered seller, it can still claim a certain percentage of Consumption Tax credit. However, this deductible percentage decreases over time, divided into two phases:
- Phase 1 (Oct 1, 2023 – Sep 30, 2026):80% of the purchase tax amount is deductible.
- Phase 2 (Oct 1, 2026 – Sep 30, 2029):The deduction rate drops to 50%.
- After October 1, 2029,a Qualified Invoice with a registration number is mandatory for a 100% deduction.
The October 1, 2026, deadline is crucial because the deduction rate will plummet from 80% to 50%. This will undoubtedly strongly incentivize businesses that have not yet acted, especially taxable enterprises acting as purchasers. They will have significantly more motivation to urge their suppliers (including a large number of SMEs) to complete the compliance transformation for Qualified Invoice issuance as soon as possible.
For e-invoice service providers and smart POS providers, the period from now until before October 2026 is the golden window for market education, product promotion, and customer acquisition.
Businesses have sufficient time to evaluate, select, and deploy systems. Service providers can also establish service networks and success cases during this period. As the October 2026 “deadline” approaches, market demand is expected to grow exponentially.
04 Strategic Path
Facing this historic opportunity, relevant service providers need to chart a clear strategic path. Market positioning should focus on providing Japanese SMEs with one-stop, lightweight integrated solutions for e-invoicing and smart POS.
In product design, it is essential to ensure full compliance with all requirements set by Japan’s NTA for Qualified Invoices regarding format, content, and electronic storage (which must adhere to the Electronic Book Preservation Law). Product forms can be flexible, either as standalone SaaS software or as API services/plugin modules that seamlessly integrate with mainstream POS systems.
For e-invoice service providers, establishing ecosystem alliances with POS hardware manufacturers and accounting software companies to offer “software + hardware + service” bundled solutions will be an effective way to quickly capture market share.
For market entry strategy, direct sales and channel partnerships should be pursued simultaneously. Focus can be placed on directly targeting industries most immediately affected by the system, such as retail and food service. Concurrently, partnerships with local tax accountant firms and business service consultancies can help reach a broader base of SME clients.
Regarding promotion timing, marketing efforts should closely leverage October 1, 2026, as the “psychological tipping point.” The current focus should be on market education and cultivation, explaining to businesses the necessity and urgency of compliance, and how early deployment allows for a smoother transition, avoiding the risks of hasty decisions as the deadline looms.
Today, in convenience stores, restaurants, and SME offices across Japan, a quiet digital revolution is underway.
From boutique shops in Tokyo’s Ginza to family-run restaurants in Hokkaido, over four million businesses are beginning to scrutinize their invoice systems and POS equipment. Compliance is no longer an option but a mandatory question for survival.
The Qualified Invoice registration number is becoming the “new passport” for B2B transactions in Japan. Businesses without it will find themselves increasingly excluded from the mainstream commercial ecosystem after 2026.
