Tax invoice in Japan Part.3|Free tax consultation in Sapporo, please contact Kumagai Nobuyasu accountant office!
I explain about preparation practice and introduction schedule regarding the introduction of the tax invoice system. If you missed preparation for the tax invoice system, which makes impossible to issue tax invoices or issuance of deficient tax invoices, you may bring the burden of consumption tax liability to you cumtomers. At the worst case, customers may stop trades and refuse new trades.
For consumption tax duty free operators, it is a particularly large impact because they become taxable operators when they register as the tax invoice issuers.
I appreciate not only taxable operators, but also duty free operators and new business founders make understand preparation for the tax invoice system by reading this article and judge whether to be a registered tax invoice issuer.
The composition of the series is as follows.
Part.1 Overview of the tax invoice system
Part.2 Required items for tax invoice
Part.3 Schedule for the introduction of tax invoice(this article)
Part.4 Office works and consumption tax return after the introduction
This article is based on the tax laws and Q&A from the national tax agency as of November 2022.
Let's review the required items in tax invoice, which was explained in Part.1.
- 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
- 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 explain mainly the part from "application for the tax invoice issuer registration" to "the introduction of the tax invoice system". Once the system introduced, there will be few significant troubles because the operation for tax invoices becomes a routine tasks.That is why it is so important to prepare for the first regulatory response.
Operators who need to respond the tax invoice system introduction
I explain about the operators who need to respond the tax invoice system again.
I say roughly, "all of" operators who transfer taxable assets or serve taxable service to other operators. That is because receiving and saving the tax invoices are the requirements of applying purchase tax credit for the operators.In other words, the operators who transfer or serve the final comsumers only need not to respond the tax invoice system.
It is not problem that issuing invalid invoices to duty free operators, however it seems that it is uncertain if the customer is a duty free operator. That is why, all of the operatators providing sales and services in Japan need to consider if they respond to the tax invoice system.
Registration procedure for tax invoice issuer
I explain about registration procedure for tax invoice issuer in this section.
In order to be a tax invoice issuer, it needs to be taxable operator, which needs to file and pay consumption tax to the tax office. In other words, the duty free operator cannot be registered and issue tax invoices. The procedures for the duty free operators will be explained in the next section.
Next, I explain about the application procedure. An applicant submit the application for tax invoice issuer registration to the Tax Office Director who have jurisdiction over the place of tax payment. After the tax office examines the sumimitted application, it registers to the eligible tax inovice issuer directory and inform the fact of registration to the applicant by a document. The format of the application form is shown in the National tax agency HP, we can submit with the paper document or e-Tax(the national tax electroric filing system). It is carefull that the destination is not the tax office, but "tax invoice registration center, which is managed by the National Tax Bureau(Ex.Sapporo National Tax Bureau in Hokkaido)" if you submit with the paper document.
If it registered before the introduction, whose date is October 1st 2023, the registration date is October 1st 2023.
The examination items are the below, that are not so severe.
- Whether it is a taxable operator
- Whether it was not sentenced to a fine or worse due to consunption tax law violation and more than 2 years from the end of the sentence for consunption tax law violation
- Whether it elected its tax manager in case of none of address, whereabout nor business office in Japan
However, if a corporation was sentenced with its representive due to consunption tax law violation, the applicaiton by its representive as a business owner is rejected too. The estimated duration from application to registration is displayed in the special site for tax invoice system. It takes about 3 weeks to 2 months as of the posting date(March 24 2023).
I will explain the registration procedures for new business founders in detail later.
Do we have to change from a duty free operator to a taxable operator!?
I explain tax invoice system correspondence for duty free operators in present.
As I said the above, the registration for tax invoice issuer is rejected if it is a duty free operators, so it needs to be a taxable operator in order to be registered as a tax invoice issuer for issuing to the customers after introduction of tax invoice system. In the principle, the operator that needs to be a taxable operator has to submit the taxable operator notification to the tax office by the date before first taxable business year.
However, it is complicated to submit both the application for tax invoice issuer registration and the taxable operator notification for the correspondence of tax invoice system. That is why, it does not need to submit the taxable operator notification for the registration of a tax invoice issuer exceptionally if it is a duty free operator now.
In addition, it is judged if it is duty free or taxable by the whole of business period in princlple. However, a duty free operator registered as a tax invoice issuer becomes a taxable operator from the registration date of tax invoice issuer. In other words, first taxable period is from not the beginning of the business year, but the registration date of tax invoice issuer.
However becoming a tax invoice issuer is voluntary, business operators who are currently duty free operators will have to consider whether to register by weighing both the disadvantages of paying consumpion tax and loss of business opportunities due to inability to issue tax invoices.
Note that it need to be a taxable operator from the beginning of business period and submit the taxable operator notification by the date before first taxable business year if sales in 2 business periods before exeeds 10 million yen.
Tax invoice system introduction for new business founders
I explain for new business founders in this section. Under the current consumption tax law, few new business founders become taxable operators at the time of establishment unless they meet certain special requirements for taxable operator or they can get tax refund due to operating import business etc.
In case of the duty free operator at the time of establishment, it cannot register as a tax invoice issuer, so it cannot issue tax invoices to the customers who require to issue. Therefore, it may have adverse effects to customer development and sales, which are especially significant at early stage.
The decision will be made depending on whether the burden of consumption tax payment or the development of B2B sales destinations is more important. If you are considering a business start in the future, especially if you are considering a B2B business, it is recommended that you issue tax invoices. Please consider becoming a taxable operator from the beginning of establishment so that it can issue tax invoices.
Next, I explain about the procedures in case of registering as a tax invoice issuer and becoming a taxable operator at the time of establishment. If it is an existing company, it shall submit the taxable operator notification and the application for tax invoice issuer registration by the day before the applicable business year in advance, but it is unreasonable at the beginning of establishment. Therefore, the operators which are established after the introduction of the tax invoice system are permitted submitting the taxable operator notification and the application for tax invoice issuer registration by the final day of the applicable business year if they register from the beginning of establishment. However, they need to prepare for tax invoice issuance from the preparatory stage.
I explained the procedures to be a tax invoice issuer. If it will be registered as a tax invoice issuer after the introduction, it cannot display the registered tax invoice issuer number on invoices, receipts and so on till the registration while it needs to display the number after the date of registration. It may receive the registration notice from the tax office a few days after the registration date, it is allowed that the operator notifys the missing required items such as the registration number later if it issues invoices etc. between the registration date and the receiving date.