Tax invoice in Japan Part.1|Free tax consultation in Sapporo, please contact Kumagai Nobuyasu accountant office!
I explain the consumption tax system in Japan, which will start on October 1 2023 in this article. I will explain the consumption tax invoice in 4 articles. I hope you understand about the tax invoice and influence to your business through you read this article.
The composition of the series is as follows.
Part.1 Overview of the tax invoice system(this article)
Part.2 Required items for tax invoice
Part.3 Schedule for the introduction of tax invoice
Part.4 Office works and consumption tax return after the introduction
Someone thinks he/she don't hurry for applying the tax invoice because he/she can afford to introduce the system introduction or it may defer the system introduction. But I hope you understand as soon as you read and apply the tax invoice system.
This article is based on the tax laws and Q&A from the national tax agency as of November 2022.
What is tax invoice?
At first, I explain the overview of tax invoice in Japan. Tax invoice is the invoice which is need for consumption tax payers to deduct consumption taxes paid to other business operators.
Originally, consumption tax is taxed to final consumers, but it is indirect tax because sale oprators pay insteadly to the tax office. On the other hand, sale operators paid consumption tax to the other operators, so that some of consumption tax paid by final consumers move to the other operators. Therefore, consumption tax operators pay to the tax office is the amount of the sales tax minus paid tax to the other operators. Tax invoice is certificate of consumption tax payment to the other operators.
I called "Tax invoice", but the name of payment document is not had to include "invoice". As long as there are the required items in payment documents, that documents consider as tax invoice in Japan. And operators do not have to issue another documents as the tax invoice, but only add the required items to payment documents.
Issuer of eligible tax invoice
The sale opretator which is a tax inovoice issuer has to issue the tax invoice document to the other operator when it operates transfer taxable assets or taxable services. The sale opretator has to issue the tax invoice document which includes all of required items other than businesses listed below.
- Public passenger transpotation(Ship, Bus or Railway)whose fee is less than 30,000 JPY
- Sales of fresh groceries in wholesale market with outsourcing to another operator by produder etc.
- Sales of agriculture, forestry or fishery products with outsourcing to Agricultural cooperatives, Fishery cooperatives or Forestry cooperatives
- Sales in vending machine or automatic service machine whose amount is less than 30,000 JPY
- Postal and freight service which is only paid by stamps(Posting only)
Background of the introduction of tax invoice system in Japan
I explain how the tax invoice system in Japan was introduced here.
Some foreign contries have already introduced the tax invoice system in order to apply purchase tax credit. In Japan, consumption tax taxable operators can apply purchase tax credit by only saving transaction documents and descripting supplier and purchase date. The merit of this system is that fewer documents should be saved, but it may be uncertainty if it corresponds to the consumption tax deposited by suppliers.
And because multiple consumption tax rates system was introduced in October 2019, it needs to inspect whether tax rates are distincted correctively at purchase in grocery store etc.
It seems that the tax invoice system will be introduced in the reason above, but the introduction date of the tax invoice will October 1st 2023, which it is 4 years later than the introduction date of multiple consumption tax rates because it concerns about backlush.
Required items for tax invoice
Required items for tax invoice are below.
- The name or title of the tax invoice issuer, and the issuer registration number
- The date of transferring taxable assets
- The content of transfered taxable assets or services(When a part of taxable assets is assets applied mitigated tax rate,the fact of asset applied mitigated tax rate)
- Total amount of tax excluding price or tax including price distinct by tax rate, and applied tax rate
- Consumption tax amount distinct by tax rate
- The name orbtitle of the tax invoice recipient
The significant items are 1.The name or title of the tax invoice issuer, and the issuer registration number, and 5.Consumption tax amount distinct by tax rate. The format of tax invoice is free as long as it lists 6 required items above. And it does not limited only a "invoice" format. I will explain the detail of required items above in Part.2.
Schedule for tax invoice introduction
I explain the introduction schedule in the chronological order below.
- October 1st 2021 Start application for the tax invoice issuer registration
- March 31st 2023 Expiration of application for the tax invoice issuer registration in case of beginning to issue on the date of the introduction
- October 1st 2023 The introduction of the tax invoice system
This is the schedule before the start of the consumption tax invoice system.Naturally, the oprators who issue the tax invoice need to update IT system, change format etc. to enable to issue by the introduction date, which is October 1st 2023.
After introduction, it will exclude purchase and expense from an operator who do not issue tax invoice from the object of purchase tax credit. However, it concerns that payment of consumption tax suddenly if it is no longer receive purchase tax credit completely. So that, it introduced transitional arrangements for receiving purchase tax credit without the qualified tax invoice after introduction of the tax invoice syetem.
- From October 1st 2023 to September 30th 2026
Allow a purchase tax credit for 80% of the puchase amount
- From October 1st 2026 to September 30th 2029
Allow a purchase tax credit for 50% of the puchase amount
I will explain the required actions to apply that transitional arrangements in Part.4.
If you cannot receive a tax invoice
What if seller does not issue a tax invoice for some reason? It is invalid even if the recipient fills the lack of the required items; however there are transitional arrangements I explained above. So, the recipient will request the issuer to reissue the tax invoice. Although the issuer has to issue immediately in principle, it is vaild even if it issued so late for some reason. So, the recipient should request reissuance to the issuer even if it cannot receive immediately.
Neverthless the issuer does not issue, the recipient should request tenaciously because the seller is oblidged to issue tax invoice if it is a registered tax invoice issuer.
I explained the overview of the tax invoice system in Japan.
It is little times to March 31st 2023, which is the expiraton date of the issuer registration in case of beginning to issue from the introduction date, which is October 1st 2023. However, you can apply the isuur registration by 30th September, which is the day before the introduction if there are some circustances that makes registration difficult.
And it takes a lot of time to prepare for tax invoice introduction; for example, IT system update, document format change. If you will have prepared for tax invoice introduction, some customers may complain or stop trading due to unissue the tax invoices. I recommend you should prepare the tax invoice system with reading those articles about tax invoice.