Japan Tax Bulletin
Qualified invoice system Q&A
September 2022
The Consumption Tax Law was introduced in 1989. Consumption
tax is VAT, where a taxable enterprise pays the difference between
the output taxes it collected and input taxes it paid during a tax
period. In order to claim an input tax credit on taxable purchases,
the requirement has been to maintain books and ledgers on taxable
purchases and retain evidence such as invoices. From October 1,
2023, the input tax credit is only allowed for taxable purchases thathave qualified invoices issued by registered qualified invoice issuingenterprises with exceptional transition rules.
The following is part of a Q&A regarding the new input tax credit
requirements under the Qualified Invoicing System released byNational Tax Agency.
1.

Qualified Invoice(1) Items included in Qualified Invoice(i) Name and registration number of the Qualified Invoice Issuer;(ii) Date of transfer, etc. of taxable assets;(iii) Details of the assets or services pertaining to the transfer oftaxable assets (if the transfer of taxable assets is a transfer, etc.
of assets subject to reduction, the details of the assets and thefact that it is a transfer, etc. of assets subject to reduction);(iv) The total amount of the tax-exclusive value or tax-inclusive
value of the transfer, etc. of taxable assets, broken down by tax
rate, and the applicable tax rate; and(v) The amount of consumption tax, etc. broken down by tax rate(vi) Name of the business entity to which the qualified invoice is
to be issued.
(2) Multiple documents
However, it is not necessary for only one document to include all of
the items required for a qualified invoice. Where a couple ofdocuments with clear inter-relationship such as an invoice and adelivery note cover the required items, it is possible to treat such
documents together as a qualified invoice. Therefore, if an invoicealone is insufficient to cover required items for a qualified invoice,and a delivery note supplements the missing items, the obligation todeliver a qualified invoice can be fulfilled by delivering an invoice anda delivery note. For example, where an enterprise delivers a delivery
note whenever it ships goods and issues an invoice monthly, delivery
notes and the invoice together can be treated as a qualified invoice
if they include all the required items together.

2.

Transactions exempt from the obligation to deliver a qualified invoice

The following transactions are exempt from issuing a qualified
invoice because of the nature of the businesses.

(i)
(ii)
(iii)
(iv)
(v)
3.

Transportation of passengers with public transportation
system(ship, bus, or rail) for which fare is less than
JPY30,000;
Sales of fresh food products, etc. by shippers, etc. inwholesale markets;
Sales of agricultural, forestry, and fishery products byproducers entrusted to agricultural cooperatives, fisherycooperatives, or forestry cooperatives, etc.;
Sales of goods through vending machines and automatic
service machines for less than JPY30,000, etc.; andPostal and freight services for which the only considerationis postage stamps (limited to those delivered to mailboxes).
Public Transportation Exception

Public transportation in 2(i) above include the following:(i)

Carriage of passengers in General Passenger Liner Business,
Freight Liner Business, Tramp business under Maritime
Transportation Law (Carriage of passengers vessel);(ii) Carriage of passengers in General passenger cartransportation business under Road transportation law(Carriage of passengers by bus) (airport access buses, etc.
and shared-ride buses operated by passengers withreservations, etc. are also included); and(iii) Carriage of passengers in a Type 1&2 railway business under
Railway Business Law, transportation business under
Trajectory law Transportation of passengers by railroads
and tracks (Carriage of passengers by railway or monorail,etc.).
Whether or not the transportation of passengers by public
transportation is less than JPY30,000 is determined based on thetax-inclusive value of one transaction. Therefore, it is not to bedetermined by per item amount (one ticket) or monthly summary,etc. Therefore, a purchase of 4 tickets of JPY13,000 with the total
amount is JPY52,000 does not satisfy the exception.
In addition, express fees and bed fees qualify for the exception as
they are directly incidental to the carriage of passengers.
However, admission fees and baggage fees do not qualify for theexception as they are not directly incidental to the carriage ofpassengers.

4.

Requirements for input tax credit for taxable purchases(1) What to do if there is an error on a qualified invoice

copies, etc. are also acceptable.
-(i) Seller
If a qualified invoice, qualified simplified invoice, or qualified
return invoice issued by a seller contains errors, the seller mustissue a revised one to a buyer.
In addition, documents such as purchase statements prepared by ataxable enterprise as a purchaser, which were checked andconfirmed by a qualified invoicing issuing enterprise as a seller are
also required to be maintained for the purpose of claiming an input
tax credit on taxable purchases. Where the seller has checked andconfirmed corrected purchase statements, the seller does not haveto issue another corrected qualified invoice, qualified simplified
invoice, or qualified return invoice.

(ii) Buyer
If a qualified invoice or qualified simplified invoice issued by ataxable enterprise contains errors, the buyer is required to request
the seller to correct them and issue corrected ones. The buyer is
not allowed to make additions or corrections by itself.
In addition, documents such as purchase statements prepared by ataxable enterprise as a purchaser, which were checked andconfirmed by a qualified invoicing issuing enterprise as a seller are
also required to be maintained for the purpose of claiming an input
tax credit on taxable purchases. As such, the buyer may correct thepurchase statements and have them confirmed by the seller.
5.

If you have been a tax-exempt business, consider reviewing
the prices of your goods and services after registration, taking
into account the consumption tax.

(2) Buyer side-In the case where the simplified taxation system is applied,retaining qualified invoices is not required.

-

Except for special exceptions such as public transportationtransactions under JPY30,000 the preservation of qualified
invoices is required in principle even for one-time transactions
and transactions of small amounts.

-

It is important to have common understanding with suppliers
as to what constitutes a qualified invoice.

-Consult with your suppliers on price revisions, etc., ifnecessary and consult on price revisions, etc.

-

It is important to manage invoices separately by whether theyhave a registration number or not.

-In order to apply the transitional measures for taxable
purchases from tax-exempt enterprises, it is necessary to keep
separate invoices.

-If you wish to apply for special provisions that do not require
the preservation of qualified invoices or transitional measurespertaining to taxable purchases from tax-exempt businesses, astatement to that effect is required.

Preparation for registration (checklist)

In order for an enterprise to be a qualified invoice issuingenterprise, the enterprise must be registered as such. The
followings are issues for consideration and attention:(1) Seller side-

Check whether a seller is required by a purchaser to issue aqualified invoice for transactions in which the seller isinvolved.

-

A qualified invoice can be an invoice, receipt, or any othername. It can also be provided in electronic form or deliveredby handwritten form.

-

A qualified invoice must include the registration number,applicable tax rate, and amount of consumption tax.

-

If the consumption tax amount includes a fraction of lessthan JPY1 in an invoice, there are rules for handling fractions.

-An enterprise should inform its clients of the registration(registration number), what constitutes a qualified invoice, andhow it is to be delivered, as necessary, and share theinformation with them.

-Retention of copies of qualified invoices is not limited tophotocopies; electronic data, list format, journals, photocopied© 2022 Grant Thornton Taiyo Tax Corporation. All rights reserved.
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