Japan Tax Bulletin
Preservation method of consumption tax
August 2021
From October 1, 2023, the qualified invoice preservation
method (“invoice system”) will be introduced as a way of thepurchase tax credit of the consumption tax to correspond to themultiple consumption tax rates. Under the method, thepreservation of "qualified invoices" issued by "qualified invoice
issuers" will be a requirement for the purchase tax credit.

i.

1.

v.

ii.
iii.
iv.

Qualified invoice

A qualified invoice is a “means for a seller to inform a buyer ofthe applicable consumption tax rates and the consumption taxamounts", and is an invoice, a delivery note, a receipt or othersimilar documents describing certain items.
2.

Registration System for the issuer of the qualified invoice and the scheduleof the registration

Only a“qualified invoice issuer”can issue a qualified invoice.
In order to become a qualified invoice issuer, an enterprise must
submit an application for the registration to the tax office. If thecompany is a tax exempt entity, it cannot be registered as a qualifiedinvoice issuer.
The application for the registration can be submitted from 1stOctober, 2021. If an enterprise wishes to be a qualified invoice
issuer from 1st October 2023, the application has to be submitted
by 31st March 2023 (if there are any difficulties, the deadline isextended to September 30, 2023).

3.

Obligations of the qualified invoice issuer (points to be noted for sellers)

The qualified invoice issuer is obliged to deliver the qualified
invoices upon the request of the purchasers, and to retain a copyof the delivered qualified invoices.
The six items below must be described in the qualified invoice(the underlined items are in addition to the current classified
invoices preservation method)vi.

Name and registration number of the qualified
invoice issuer
Date of transaction
Details of the transaction (mentioning thatthe transaction is subject to the reduced tax rate)
Total amount of consideration for each tax rate
(excluding or including tax), and applicable tax rates
Amount of consumption taxes, etc. (Fractions areavailable once for each tax rate per invoice)
Name of the entity to which the invoice is to bedelivered

If there is an error in the qualified invoice, the qualified invoice
issuer must issue a corrected qualified invoice.
The following acts are prohibited and penalties are imposed forviolations.
i.
ii.

4.

Delivering a document that may be misunderstood asa qualified invoice by an entity that is not registered asa qualified invoice issuer
The qualified invoice issuer delivers a qualified invoicewith false information
Requirements for the purchase tax credit (points to be noted for buyers)

Under the qualified invoice preservation method, except incertain cases where it is difficult for the purchasers to receive
qualified invoices, etc., the preservation of books describing
certain information (same as the current classified invoices 1
preservation method) and of the qualified invoices, etc., are arequirement for the purchase tax credit. For such above difficult
cases, it is allowed to receive a purchase tax credit by keeping only
the books. The followings are cases where purchasers need notreceive qualified invoices:

carriage of passengers by ship, bus or train as public
transportation (less than JPY 30,000),
purchase from vending machines (less than JPY 30,000),
taxable purchases which are considered to be normallynecessary related to travel expenses, accommodationexpenses, daily allowances for travel expenses, andcommuting allowances, etc. paid to employees, etc.

An invoice where items the standard rate is applied to and their amounts and items the reduced rate is applied to and their amounts areseparately stated.
1

5.

Registration procedures for a tax exempt entity

In order for a tax exempt entity to be registered as a qualified
invoice issuer, it is necessary for them to submit the "Notificationof election as a taxable entity for consumption tax" in addition to
the application of the registration for a qualified invoice issuer.
However, when an enterprise is registered as a qualified invoice
issuer during a taxable period that includes October 1, 2023, there
is a transitional measure that the company becomes a taxable
entity from the date of registration (i.e. no need for thesubmission of the "Notification of election as a taxable entity for
consumption tax"). After the registration, a company becomes ataxable entity and has to file the consumption tax return. The
following illustrates is an example for a company with a fiscal year
ending in December.
i.

When the registration date is during the taxable
period which includes 1st October 2023 (thetransitional measure is applied) : The necessary
application is the "Application for the registration"ii.

When the registration date is after the taxable
period which includes 1st October 2023 : The
necessary applications are the "Notification ofelection as a taxable entity for consumption tax"
and the "Application for the registration"

can claim a certain percentage of the purchase tax credit during acertain period as shown in the following table:
PeriodFrom 1st October to 2023
to 30th September 2026
From 1st October to 2026
to 30th September 2029
7.

Deductible amount
80% of the purchase tax
50% of the purchase tax

Note

Only a qualified invoice issuer can issue invoices with 10 %consumption tax on. Therefore, it is most likely that a tax-exempt
entity elects a taxable entity status and qualified invoice issuer inorder to continue transactions with current customers.
Please note that the current simplified taxation system2 is stillavailable. Thus, even if an enterprise chooses to become aqualified invoice issuer, it can still select the simplified taxation
system to calculate purchase tax credit in the simplified way
instead of calculating the purchase tax credit amount in a tax
period based on the information included in qualified invoices ithas received.

6.

Transitional measures for taxable purchases from tax exempt entities
After the introduction of the qualified invoice preservation
method on 1st October 2023, taxable purchases from suppliers
other than the qualified invoice issuers (i.e. tax exempt entities andgeneral consumers) will not be eligible for the tax purchase
However, when an enterprise retains invoices that contain thesame information as the classified invoices, and books describingthat the company applies to the transitional measure, a company
Under the simplified taxation system, the purchase tax credit amount is calculated as a certain percentages of the tax amounts of taxable
revenue for small enterprises.
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