Japan Tax Bulletin
Electronic Preservation System for Books/Documents
September 2021
The Act on Special Measures for Preservation of National TaxRelated Books and Documents Prepared Using Computers(hereinafter referred to as the "Act on Electronic Preservation
System for Books/Documents") has been revised and it will takeeffect on January 1, 2022.
The Act on Electronic Preservation Books/Documents permits
preservation by electromagnetic records, etc., and stipulates thefollowing: (1) preservation of national tax-related books byelectromagnetic records (Article 4.1) or preservation on microfilm(Article 5.1), (2) preservation of national tax-related documents byelectromagnetic records (Article 4.2) or preservation on microfilm(Article 5.2), (3) preservation of national tax-related documents byelectromagnetic records using scanners (Article 4.3) orpreservation on microfilm (Article 5.3), and (4) preservation ofelectronic transactions by electromagnetic records or preservation
on microfilm (Article 7).
1.

Electronic Preservation for Books/Documents(1) Abolition of the prior-approval system by the chief of thetax office
The requirement for prior approval by the chief of the tax office,which was required for the preservation of books and documents
related to national tax by electromagnetic records or microfilms as
stipulated in Articles 4 and 5 of the Act, has been abolished.
Under the law, there is a distinction between national tax-related
books and national tax-related documents.
Books related to national taxation are books that must be kept
and preserved according to the provisions of laws related tonational taxation, such as journal ledgers, cash receipts anddisbursements ledgers, accounts receivable ledgers, fixed asset
ledgers, sales ledgers, purchase ledgers, and general ledgers.
Documents related to national taxes are documents that must bepreserved according to the provisions of laws related to nationaltaxes, such as balance sheets, profit and loss statements, inventory
sheets, invoices, order forms, contracts, and receipts.
(2) Reduction of additional tax on under-reporting for excellent
electronic books
Under the revision, there are "excellent" electronic books and"other" electronic books. Those obliged to preserve the books byusing electromagnetic records, meeting the requirements for"excellent" electronic books, and submitting a notification to thehead of the competent tax office in advance will receive a 5%
reduction in the additional tax on under-reporting. This
notification of special application must be submitted by thestatutory due date of the national tax return to which the additional
tax on under-reporting is to be applied1.

1(2)-1 Preservation requirements for “excellent” electronic books
If all of the following items are met, a book will be recognized asan "excellent" electronic book.
i) When corrections or deletions of recorded items are made, acomputer processing system capable of confirming these facts anddetails shall be used.
ii) If the input is made after the regular business processing period,a computer processing system shall be used to verify this fact.
iii) It must be possible to confirm the relationship between therecorded items in the electronic books and the recorded items inother books related to the electronic books.
iv) Documents related to the system (system outline, system
specifications, operation manuals, administrative processingmanuals, etc.) must be prepared.
v) A computer (such as a personal computer), programs, displays,
printers, and their operation manuals must be arranged at thestorage location so that they can output promptly in an orderly andclear format on a screen or document.
Search requirements2:
A) It is possible to search by date of transaction, transaction
amount, or client.
B) It is possible to search by dates or specifying the scope ofamounts.
C) It is possible to search by a combination of two or more
arbitrary record items.
(2)-2 Preservation requirements for “other” electronic books
Only the following are required:- The record must be made in accordance with the principles ofregular bookkeeping (generally double-entry bookkeeping).
- Documents related to the system (system outline, system
specifications, operation manuals, administrative processingmanuals, etc.) must be prepared (see (2)-1.iv above).
- A computer (such as a personal computer), programs, displays,
printers, and their operation manuals must be arranged at thestorage location so that they can output promptly in an orderly andclear format on a screen or document (see (2)-1.v above).
- The company shall be able to respond to requests by tax
officials to download electromagnetic records.

National Tax Agency's QA39 on bookkeeping documents prepared using a computer (July 2021).
If the person obliged to preserve is able to respond to the request of downloading electromagnetic records based on the right of inquiry and inspection by tax officials, (B)and (C) of the search requirements are no longer required. The same applies to 2. Scanner preservation and 3. Electronic transactions as described below.
2

2.

Scanner preservation

National tax-related documents that are subject to scannerpreservation include documents that: clarify the details of transactions at the beginning and end ofa series of transaction processes (contracts, receipts); are created in the middle of a series of transactions (depositslips, IOUs, bank passbooks, checks, promissory notes,
securities delivery statements, bond applications, applications
for contracts (without standardized terms and conditions),
invoices, delivery notes, delivery slips, export certificates);
 are not directly linked to the flow of funds or goods(inspection receipts, receiving reports, cargo receipts,
quotations, purchase orders, contracts application (withstandardized terms and conditions); and copies of these documents3.
National tax-related books (journal ledger, general ledger, otherbooks, etc.) and financial documents (inventory, balance sheet,profit and loss statement, other documents, etc.) are not eligible
for scanner preservation.
(1) Relaxation
oftimestamp
requirements, searchrequirements, etc.
It is no longer necessary for recipients to sign their own names
on national tax-related documents when scanning them.
When a correction or deletion is made to an electronic record, if
the fact and content of the correction or deletion can be verified
in the cloud4and it can be confirmed that the record was saved
within the input period, it can replace the need for a timestamp.
(2) Additional taxation on heavy tax measures
If there is concealment or disguise of national tax-related
documents that have been scanned and saved, a 10% additional
heavy tax will be imposed.
3.

Electronic transactions

Electronic transactions refer to transactions in which transaction
information is exchanged using electromagnetic systems.
Transaction information refers to "matters that are normally
included in order forms, contracts, delivery slips, receipts,
quotations, and other similar documents" received or delivered inconnection with transactions. Specifically, it refers to EDI(electronic data interchange) transactions, transactions via theInternet, etc., transactions in which transaction information isexchanged via e-mail, and transactions in which transaction
information is exchanged via a website established on the Internet 5.
(1) Preservation requirements for electronic transactions
Requirement of truthfulness:

One of the following measures must be taken to ensure theveracity of the records:i) After the transaction information is time-stamped, thetransaction information is exchanged.
ii) Time-stamp the transaction information promptly after it isexchanged (or promptly after the normal period of time forprocessing the transaction has elapsed), and make it possible tocheck the information on the person or supervisor who isresponsible for storing the information.
iii) In the event of correction or deletion of recorded items,
transaction information is exchanged and stored in a system thatallows confirmation of these facts and details, or in a system that
does not allow correction or deletion of recorded items.
iv) Administrative rules are established regarding the preventionof corrections and deletions without justifiable reasons, andoperate in accordance with those rules.
Visibility requirements:v) A computer (such as a personal computer), programs, displays,printers, and their operation manuals must be arranged at thestorage location so that they can be output promptly in an orderly
and clear format on a screen or document.
vi) A summary of the computer processing system shall beprovided.
vii) Ensure that there is a search function for the books6.
(2) Abolition of preservation of output documents, etc.
After January 1, 2022, if there is no disaster or othercircumstances and the electromagnetic records are not preservedin accordance with the preservation requirements, the approval
for blue return may be revoked, and the preservation
requirements for electronic transactions must be met. 7.
Electromagnetic records pertaining to transaction information,etc. of electronic transactions for consumption tax purposes cancontinue to be preserved in the form of output documents.
(3) Addition of heavy tax.
If there is a fact that electromagnetic records pertaining totransaction information of electronic transactions have been
concealed or disguised, a measure to add 10% to the heavy
additional tax imposed on the failure to file a return related tosuch fact has been established8.
4. Period of application
The above amendments will be applied to books and documents
related to national tax which will be kept on or after January 1,2022.

National Tax Agency's QA2 on scanner preservation (July 2021).
This includes cloud computing, etc., which cannot be corrected or deleted.
5 National Tax Agency's QA2 on electronic transactions (July 2021).
6 This is the same as Note 2 of the search requirements in the aforementioned “1. Electronic preservation for books/documents”.
7 National Tax Agency's QA42 on electronic transactions (July 2021).
8 National Tax Agency's QA40 on electronic transactions (July 2021).
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