e-Invoicing in Japan: Timeline, Guidelines, Process, and Steps for Implementation

Japan needed to go paperless to improve tax compliance and streamline business transactions. To achieve this, it introduced the PEPPOL-based e-Invoicing system in October 2023.

However, the e-Invoicing system in Japan officially began with the launch of the new consumption tax in 2019. It further necessitated the introduction of e-invoices to keep a better track of taxes, making compliance crucial for businesses in Japan. 

Then came the Qualified Invoicing Method System ("QIMS") on 1 October 2023, which operated on the European VAT system model. It required businesses to issue invoices in paper and electronic format along with all the specific details, marking the introduction of e-invoicing in Japan. 

This guide explains what e-Invoicing is, its regulatory requirements, compliance obligations, benefits, and how businesses can smoothly incorporate this into their accounting systems. 

What is e-Invoicing in Japan?

Japan's e-Invoicing is the electronic exchange of invoices in a structured format, according to the PEPPOL standard for secure and effective transfer. Japan uses the “JP PINT” format, a Japanese adaptation of PEPPOL's BIS Billing 3.0, for smooth invoicing between enterprises and government offices. With the introduction of the Qualified Invoice System, only registered businesses can issue e-invoices. 

E-invoice Implementation Timeline

e-Invoicing in Japan is not mandatory but is required by businesses under the Qualified Invoice System (QIS). Here is how Japan implemented the E-invoice framework: 

e-Invoicing Process in Japan

Businesses in Japan should follow these steps to create E-invoices with respect to Business-to-business (B2B) or Business-to-government (B2G) transactions. 

• Select a Compliant Platform: Select an e-Invoicing platform which integrates easily with your existing accounting systems and satisfies PEPPOL standards.
• Register & Configure: Register with a certified e-Invoicing service provider and configure the system according to industry requirements.
• Enter & Process Data: Make sure invoices contain required information, such as tax ID and JCT value, and transaction details, such as tax rates, invoice amount, and supplier-buyer details.

e-Invoicing Compliance Guidelines

Here are the e-invoicing compliance guidelines businesses should follow: 

• Japan's e-Invoicing follows the Qualified Invoice System with the JP PINT format on the Peppol BIS Billing 3.0.
• Qualified invoices must contain the issuer's tax ID, invoice date, and the tax rates to be applied.
• E-Invoicing is optional for B2G and B2B, but businesses that want to claim ITC should issue E-invoices.
• Invoices should be retained for 10 years.
• Taxpayers must be registered by the Japanese National Tax Authority (NTA) to issue a qualified invoice.
• Enterprises must obtain the 14-digit JCT code to issue the qualified invoice.
• Electronic signatures are not necessary to issue E-invoices.

Information to be Filled Out in a Qualified Invoice

Here are the necessary details issuers should incorporate in a qualified invoice. 

• Preparer's Name & Registration No.
• Transaction Date
• Transaction Details (incl. reduced tax rate)
• Total Amount & Tax Breakdown
• Consumption Tax Amount by Rate
• Recipient’s Name/Title
• Customs Import Permit Details (for bonded goods)

Who Needs to Comply with e-Invoicing in Japan? 

Businesses dealing with B2B and B2G transactions are required to comply with the e-Invoicing guidelines in Japan. Even though it is not mandatory, failure to do so can result in the loss of input tax credit. 

Benefits of e-Invoicing in Japan

The benefits of e-Invoicing for businesses in Japan are as follows: 

• Reduces cost by eliminating the expense of printing, storage, and manual handling.
• Enhances payment and invoice cycles, optimizing cash flow.
• More accurate than the manual invoicing process.
• Promotes sustainability through minimizing paper usage.
• Facilitates compliance with international tax and trade legislation more easily.

How can ClearTax help a business with e-Invoicing in Japan? 

ClearTax, being a reliable source of e-Invoicing, assists companies in meeting Japan's Qualified Invoice System (QIMS) requirement with:

• ERP & POS Seamless Integration: Automatically prepares bills and verifies compliance with PEPPOL standards.
• Real-time Compliance Checks: Validates invoices against Japan’s tax regulations to prevent errors.
• Cloud-Based e-Invoicing Portal: Facilitates easy tracking, reconciliation, and management of invoices.
• Automated Reporting & Compliance Alerts: Helps businesses achieve timeliness and avoid tax penalties.

Conclusion

Japan's e-Invoicing system for B2B and B2G enables companies to automate invoices and claim Input Tax Credits (ITC) under the Qualified Invoice System (QIS). Claiming ITC by registered taxpayers who issue qualified invoices decreases the tax burden. With ClearTax's secure e-Invoicing solution, organizations can remain compliant, streamline generating invoices, and easily handle tax burdens.