The transition to PEPPOL as an e-invoicing system is expected to generate benefits for Japanese businesses. The taxing system in Japan has long needed an upgrade. Japan has taken significant time to give up the traditional paper processes.
The shift toward electronic invoices was triggered by the pandemic in 2019. As the offices shut down, organizations realized the dangers of depending entirely on in-person tasks.
The unwillingness to shift to digital methods was also identified as a potential hindrance to Japanese economic growth.
This is where the e-invoicing steps in. This qualified invoice method system will launch in October 2023 nationwide. It will enable organizations to avoid errors related to analog processing.
Do you want to learn more about the electronic invoices in Japan? Are you curious about the future of e-invoices in the country? Keep reading the article and get your questions answered.
Is e-invoicing mandatory in Japan?
E-invoicing is not mandatory in Japan to date. The Japanese government did not have a very favorable taxing system until 2019. Japanese consumption tax system was proposed in 2019. After this, e-invoicing was introduced in the country.
The association sets the taxing standards in Japan for the Promotion of Electronic Invoices (EIPA). This association was developed in 2020 and has allowed better tax management. EIPA is now focusing on PEPPOL implementation in Japan.
The B2C, B2G, and B2B interactions are bound to use electronic invoicing in Japan later. However, this system has plenty of benefits. This is why the government will enforce a Qualified Invoice system in the coming months.
Ultimately, the taxpayers will be registered with the Japanese National Tax Authority.
The first step for the government would be to make public sector businesses take up e-invoicing. Following that, digital invoices will gain popularity all around the country.
Adoption of PEPPOL in Japan
The adoption of PEPPOL as a countrywide e-invoicing system is in process in Japan. Due to accuracy and transparency, PEPPOL promises a digital transformation in the country. It is also expected to support cross-border e-procurement.
Under the new system, a JCT taxpayer will retain a qualified invoice issued by a registered invoice issuer. This will enable them to claim input credit. The last date to get Japan Consumption Tax system ID is September 30, 2023.
By digitalizing the invoice system, Japanese businesses will gain more profits. Not only that, but there will also be faster processing of invoices.
The faster processing time will save a lot of resources for companies and organizations.
PEPPOL will also help in maintaining the integrity of electronic documents. The acknowledged PEPPOL service provider will therefore increase connectivity and keep threats away.
How to send compliant e-invoices in Japan?
To send compliant e-invoices, the Japanese government has set some specific requirements.
Once you have all the data required by the government, you can generate the e-invoices for your business. This data helps the government track your transactions during an audit and ensures transparency.
Information required by JCT
The Japanese Consumption Tax (JCT) requires information on newly qualified invoices. This information includes
- Supplier name and supplier tax ID number
- Date of invoice
- Transaction description (especially details of reduced tax)
- Taxable amount with the applicable tax rate
- Consumption tax amount with the relevant tax rate
- Buyer name
The qualified invoices must use JPY as the currency of the tax amount. In the case of a foreign currency, the invoice must be converted to JPY.
Steps to send compliant e-invoices
Here are the steps that are taken after the collection of the required information.
- Generation of invoice data
- Data sending
- Data reaches the buyer’s access point
- Information is delivered to the buyer’s receiver machine
Generation of invoice data
The invoice data is generated using a specific format for e-invoices. Once the invoice is formatted according to Japan Electronic Invoice Standard (JEIS), it is ready to be sent.
The data is then sent through Access Point Sender. This Access Point Sender is a part of the PEPPOL network. Before the data is sent, it is authenticated and double-checked.
Data reaches the buyer’s access point
As data is transferred from the seller’s system to the buyer’s system, it is ready to be processed. Prior to the delivery to the buyer’s receiver, it reaches the buyer’s access point.
Data is delivered to the buyer’s receiver machine
The last step is delivering data to the buyer’s receiver machine. As the data is received, it is ready to be analyzed, stored, and accessed when required.
Characteristics of the electronic invoice in Japan
Electronic invoices in Japan must follow the legal framework imposed by the Japanese government. Compliant invoices need to match the standards of JEIS. For consistency purposes, the qualified invoices need to follow a specific format.
In 2023, Japan is to introduce a new invoicing system. This system uses the Standard Audit File for Tax (SAF-T) format. The new electronic invoicing system will allow the digitalization of business processes.
The PEPPOL network is best to be used for e-invoicing in Japan. After its success in other countries, this network is gaining popularity in Japan. Through PEPPOL, digital invoices are exchanged in the most error-free manner.
The qualified invoice format is as per the JP PINT. This is a standard PEPPOL format with specific requirements. The file format and other information shall comply with the defined guidelines.
As long as the requirements are met, there is no need for a digital signature.
To issue electronic invoices, specific certifications are required. The governing bodies do these certifications. The businesses were to apply to the National Tax Agency for such credentials. The deadline to apply was March 31, 2023.
As far as the archiving regulations are concerned, the required storage period is ten years.
To learn more about the legislation and deadlines for e-invoicing in Japan, you can visit: E-invoicing in Japan.
What can businesses do to comply with e-invoice regulations in Japan?
To comply with e-invoice regulations in Japan, businesses must first identify the regulatory requirements for e-invoicing. The organizations shall also be able to set up the necessary infrastructure for digital invoices.
Businesses in Japan must follow a step-by-step compliance process. This will help to achieve successful implementation of the e-invoicing system. Each company must develop its own design and test that system before e-invoicing becomes mandatory in the country.
Aside from setting up the proper infrastructure and system, businesses must train their staff. The employees should be well-trained to work with e-invoices and manage them efficiently.
The connectivity and operation tests can be performed once the system is set up and the staff is trained. Such tests will make the adoption of e-invoicing a hundred percent successful for a business.
After the digital invoicing system is in practice, it must be regularly reviewed and monitored. This will help to ensure the ongoing success of the business.
The most important step for getting your company ready for compliant e-invoicing in Japan is partnering with a reliable access point provider. Storvecove can help with that. Their simple API can help you connect to PEPPOL and follow e-invoicing regulations in Japan.
What does the near future of e-invoicing look like in Japan?
The switch to e-invoicing will generate fruitful outcomes for businesses in Japan. This transition will increase the productivity of B2B and B2G processes. Additionally, it will also improve tax compliance.
This transition will increase the productivity of B2B and B2G processes. Additionally, it will also improve tax compliance.
As the popularity of this system increases within the country, it will become more and more beneficial. With a higher number of automated businesses, the country’s overall productivity will also see a rise.
E-invoicing will also improve data security within the country. The sensitive data will be far more protected and easily accessible.
The main risks associated with implementing this system are the operational risks. Some businesses in Japan might need help to work with structured electronic invoices.
However, proper training of the staff can reduce, and even eliminate this risk.
Takeaway: Get ready to send compliant e-invoices in Japan
The Traditional Invoice Retention System has been operational in Japan since 2019. The country has experienced the effectiveness of this system. Therefore, it is ready to introduce a VAT invoicing system and digitalize the consumption tax system.
Adopting PEPPOL as an e-invoicing network will help the country better control its taxing system. Moreover, it will also simplify the cross-border invoicing processes for Japan.
Storecove can help you meet the different taxation needs of individual countries with a single API. This API works in over 50 different countries.
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