Compliance Services

Our previous blog has talked about the upcoming consumption tax reform in Japan, where businesses are required to provide a “qualified invoice” to claim input tax credits. The “Qualified Invoice system” will follow the PEPPOL PINT standards and is to be implemented in October 2023.  

 To be eligible to issue a “qualified invoice,” vendors must register with their local tax office by March 2023. The government recently announced that registration applications after this date will also be accepted, this is to ease the time burden on the taxpayers.  

Rather than being a mandate, this reform is a recommendation from the Japan Digital Agency (JDA). The new invoice system will, however, affect all Japanese businesses who wish to claim input tax. 

Japan’s economic growth could be adversely affected by the paper-based back-office operations of its business operators. As a consequence of the COVID-19 outbreak, the country has become more aware of the risks of heavily relying on in-person work when offices are closed.  

Considering this situation, EIPA (Japan E-invoicing Association) was established to promote the use and popularization of digital invoices in Japan as a means of resolving it. From 1st October 2023, Japan will introduce a new Qualified Invoice System, which requires invoice issuers to register with the tax office to obtain a consumption tax ID which must appear on “Qualified invoices”.  

The “Qualified invoice” will follow the PEPPOL PINT standards. Invoices that do not comply with the requested format and do not bear the consumption tax ID number of the JCT registered supplier will not be eligible for consumption tax reclaims on purchases. 

In order to issue qualified e-invoices in Japan, vendors must register with their local tax office before 31 March 2023.   EIPA encourages businesses to start using Peppol-compliant e-invoicing software by October 2022 to ensure they are fully prepared when this deadline (October 2023) arrives. 

We previously wrote about the upcoming “Qualified Invoice system” for Japanese Consumption Tax (JCT), in which taxpayers are only able to claim input VAT from JCT registered vendors. All Japanese vendors intending to issue e-invoices must register with their local tax office before 31 March 2023.

In addition to this, the Japanese government is working on implementing the “Qualified Invoice” system using Peppol standards. Peppol is a common framework for trading partners to exchange standards-based electronic documents over the Peppol network.

EIPA (E-Invoice Promotion Association), established in July 2020, is the dedicated organization responsible for developing and building a simple-to-use electronic invoicing system for Japanese companies. The “Qualified Invoice” System will launch in October 2023, but businesses are encouraged to begin using Peppol-compliant e-invoicing software by October 2022.

Japan will introduce a new qualified invoice regime for Japanese Consumption Tax (JCT) with effect from 1 October 2023. This will bring the JCT regime more closely in line with European-style VAT regimes, and in order to claim input tax credit, the purchaser will be required to retain ‘qualified invoices’ issued by ‘qualified invoice issuers’. Only taxable persons are eligible to register as qualified invoice issuers, and cannot be JCT exempt enterprises (i.e. they cannot be exempt from the obligation to file a JCT return and remit JCT). Unlike the current system, this requirement applies even if the enterprise’s taxable sales for the base period are JPY 10 million or less. Registration to become a qualified invoice issuer opens on 1 October 2021.

Japan will introduce a new qualified invoice regime for Japanese Consumption Tax (JCT) effective 1 October 2023. Under the current ‘Transitional Invoice Retention System’ (effective since 1 October 2019), in order to claim a JCT input credit, taxpayers are required to comply with certain bookkeeping and invoice retention requirements. This includes the recording of general information, such as the name of the vendor, date of transaction, consideration paid for transactions, etc.
Under the ‘Qualified Invoice Retention System’ (effective 1 October 2023), in addition to similar bookkeeping and invoice retention requirements, a taxpayer will only be able to claim an input JCT credit from a JCT-registered vendor.
To become a JCT-registered vendor and issue a qualified invoice, vendors must submit the appropriate application to the National Tax Agency (NTA). JCT exempt entities will be ineligible to become a registered vendor.
The application for this registration will begin on October 1, 2021, and in order to become a registrant by 1 October 2023, the vendor should file the application with the relevant tax office no later than 31 March 2023. The NTA will publish a list of registered entities on its website.