Japan is currently undergoing a significant change in its tax system, transitioning to electronic invoicing (e-invoicing), effective as of October 2023. This shift, spearheaded by the E-Invoice Promotion Association (EIPA) and backed by the Japanese government, is transforming the approach businesses take to manage and archive transaction documents.
In Japan, the National Tax Agency and the Digital Agency oversee tax matters, including e-Invoicing.
Starting from October 1, 2023, while there's no mandate to use electronic formats generally, Japan will require businesses to use 'qualified invoices' for tax purposes. These invoices should comply with the Qualified Invoice Method and can be exchanged electronically via the Peppol network. The Digital Agency actively encourages the use of the Peppol format for electronic invoice exchanges.
To issue these qualified invoices, companies need to register with the Tax Authority and secure a 14-digit Japan Consumption Tax (JCT) code.
The designated format for these invoices is the PEPPOL BIS Standard Invoice JP PINT.
An electronic signature is not a requirement for these invoices.
Established in July 2020, the EIPA quickly set out to revolutionize invoicing in Japan. Its goal is to make e-invoicing standard across the country, utilizing the Peppol network. This ambition extends to ensuring the government creates user-friendly systems that facilitate this shift for businesses, aiming to enhance efficiency and create new opportunities.
With the amendment of Japan's Electronic Record Retention Law in 2021, businesses like Ms. Suzuki's local bakery in Kyoto have transitioned from keeping paper records to storing all transactional documents electronically. This change, effective January 2024, is helping her keep better track of orders and receipts, significantly reducing the clutter of physical files.
The new tax compliance system, effective from October 2023, introduces the concept of 'tekikaku seikyusho' or proper invoices. A Kyoto-based craftsman, Mr. Yamada, now includes detailed information like tax registration numbers and specific tax rates on his invoices, ensuring compliance with the new regulations while making his transactions more transparent to his clients.
The new Qualified Invoice Method mandates the retention of specific invoices to claim tax credits. Japan is aligning this method with the international Peppol standard, specifically the PINT model, to ensure consistency and meet both local and international requirements.
Japan's adoption of the Qualified Invoice Method, aligned with the Peppol standard, is a significant step. A Tokyo tech startup, led by Ms. Kobayashi, is leveraging this method to efficiently manage their invoices. Using the PINT model, they seamlessly integrate local and international billing requirements, making their business operations more efficient.
The deadline for businesses to comply with the new e-invoicing system is September 30, 2023. A Sapporo-based retailer, Mrs. Nakamura, is working diligently to register her business with the Tax Authority. She aims to meet the deadline and smoothly transition to the new system, ensuring her business remains compliant and efficient.
These real-time examples demonstrate the practical impact of Japan's transition to electronic invoicing, highlighting how it is simplifying and modernizing business processes across various industries.
To meet the e-invoice rules in Japan, businesses need to understand what the law asks for e-invoicing. They have to set up the right tech for digital bills.
Companies in Japan should follow a clear process to get ready for e-invoicing. They need to create their own way of doing it and check it works before it's a must in the country.
Besides getting the right tech and system, it's key to train the team. Workers should know how to handle and manage e-bills well.
Once everything's set and the team knows what to do, they should test how it all works. This makes sure e-invoicing works well for the business.
After starting to use digital bills, companies should keep checking and watching how it's going. This keeps the business doing well.
A big step in getting ready for e-invoicing in Japan is to work with a good access point provider. Storvecove can help with this. They have a simple way to connect to PEPPOL and stick to the e-invoicing rules in Japan.
With the new regulations kicking in from October 2023, businesses must issue invoices with specific details, known as 'tekikaku seikyusho' or 'proper invoices'. These invoices must include:
Interestingly, Japan allows for these details to be spread across documents, provided there's a clear reference linking them.
The complete shift to electronic invoicing in Japan is anticipated to greatly enhance the efficiency of businesses. This change represents a major advancement in the way transactions are handled, promising faster processing, reduced errors, and improved overall productivity. However, to fully reap these benefits, Japanese business operators must proactively engage in preparations. This involves a thorough revamp of their existing IT infrastructure and a meticulous review of internal procedures to ensure they align with the demands of the new digital transaction model. By doing so, businesses can smoothly transition into this new era of digital invoicing, positioning themselves to efficiently handle their financial transactions and adapt to the evolving digital landscape.
Japan is getting ready for a big change in how businesses do their billing, by starting to use e-invoicing from October 2023. This new way of invoicing is going to make things better for companies. It will make business dealings between companies and with the government faster and easier. It's also going to help businesses do their taxes more easily.
The more companies start using e-invoicing in Japan, the more everyone will benefit. It will help businesses do things faster because a lot of the work that used to be done by hand will now be done by computers. This is not just good for individual businesses; it will help the whole country's work get done quicker.
E-invoicing is also going to make keeping important business information safe easier. Important and private business details will be better protected and easier to get to when needed.
However, changing to e-invoicing can be a bit tricky at first. Some businesses might find it hard to use these new electronic bills. But, if people are trained well, they can learn to use this new system and avoid any problems. This training will help make sure that the move to e-invoicing goes smoothly for everyone.
For more information and updates, visit Digital Agency Japan.
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