Japan has an ambitious schedule for making B2B e-invoicing compulsory.
E-Invoicing

Japan: Mandatory Tax Compliant Invoice begins in 2023

| | Product Manager software applications/services electronic business data exchange, SEEBURGER
Japan: B2B E-Invoicing to Become Mandatory in 2023

The E-Invoice Promotion Association (EIPA) was founded in 2020 to develop and promote a standardized e-invoicing system in Japan. They soon submitted a proposal to the Japanese government to use Peppol as the basis for a new Japanese standard for tax-compliant e-invoicing. This has been approved. EIPA`s timeline[1] for introducing the tax-compliant invoicing mandate in Japan is very tight. Under the new system, E-Invoicing will be required to be retained for input tax credit purposes from 1st October 2023.

Roadmap Towards E-Invoicing in Japan

Roadmap towards e-invoicing in Japan
Figure 1: Roadmap towards e-invoicing in Japan

Alongside using the Peppol transport network and the Peppol Business Interoperability Specifications for e-invoices and credit notes, Japan is also introducing further legislation for tax compliance.

What does tax compliance regarding e-invoicing mean in Japan?

The new tax regulations coming into force 1st October 2023 require taxpayers to issue invoices containing certain information. These are referred to as tekikaku seikyusho, essentially ‘proper’ or ‘correct’ invoices. As Japan uses different rates for their consumption tax[2] (essentially VAT), namely 8% and 10%, it may be tricky for some taxpayers to list their tax payments correctly.

Invoices will need to contain the following details:

  • Name of issuer (seller who is registered for consumption tax) and their tax registration number
  • Date of transaction
  • Description of transaction
  • Total transaction amount (either tax-exclusive or tax-inclusive) per tax rate
  • Amount of tax per tax rate (rounded only once per tax rate in an invoice)
  • Recipient’s name

The authorities have not prescribed either a format or an official title for this document. This means that any document containing the above information may be considered an invoice for tax purposes. This would include items such as a delivery note containing price information, a common document in Japan. Moreover, although all these details need to be included, they don’t necessarily need to be in a single document, as long as there is a clear reference to a corresponding document.

The main change for taxpayers – and certainly a challenge for some – will be to list the different tax rates and amounts per document. For taxpayers who only work with one tax rate, it shouldn’t be too difficult to accommodate this. However, it becomes trickier if an invoice covers multiple tax categories.

Thanks to their partnership with ENDEAVOR SBC Co. Ltd., SEEBURGER is well prepared for the upcoming change and can build upon more than 14 years of experience in the Japanese market.

Why have the Japanese government and EIPA chosen Peppol as the Japanese standard for e-invoicing?

Peppol has been moving from purely public procurement towards B2G and B2B transactions, especially invoices. In that time, Singapore, Australia and New Zealand have adopted Peppol for B2B e-invoicing. This has all led to Japan considering Peppol to be “in the closest position to become a global standard”[3].

At present, Japanese invoices are often paper-based summaries of all deliveries or services within a defined period of time. It is common to issue summarized invoices in Japan on a monthly basis. This current Japanese business practice, alongside other specific requirements regarding e.g. consumption tax, needed to be considered in Japan’s future e-invoicing system. The upcoming adoption of Peppol-based, tax-compliant electronic invoices in XML format, is expected to become a significant catalyst towards digitalized “straight through processing”. This would allow business partners to match and reconcile physical (e.g. orders, deliveries) and financial supply chain transactions (e.g. invoices, payments) efficiently.

What is different about Peppol-based e-invoicing in Japan compared to Europe?

Japan’s membership of Peppol in 2022 means another member of the Asia-Pacific region is now part of the community. However, Japan was the first country to start with a local specification, ‘Peppol BIS Billing JP’[4] based on the principles of the Peppol International Invoicing Model (PINT). The specification ‘Peppol BIS Billing JP’ was created in a partnership between EIPA and OpenPeppol. The PINT model was designed to facilitate cross-border invoicing in an international context, and was developed on the basis of the European core invoice (EN-16931) and Peppol BIS Billing 3.0. However, it has been extended to cover international tax regulations.

Secondly, Peppol Service Providers need to be approved by the Peppol Authority of Japan, Japan’s Digital Agency. SEEBURGER was approved in September 2022 and is one of the first Peppol service providers in Japan. During the approval process, the Peppol Authority of Japan assesses security measures, compliance with tax regulations and a provider’s knowledge of the local market and the businesses, of which the majority are SMEs in Japan.

How SEEBURGER can help you

SEEBURGER has been officially acknowledged by the Japan Peppol Authority as one of the first providers of Peppol Access Point Services for Japan. Since SEEBURGER was also certified as one of the first German Peppol Access Point Certified Providers in 2019 by the OpenPEPPOL AISBL, we can now draw on significant experience in mapping and exchanging large volumes of Peppol messages. SEEBURGER is also a certified Peppol Access Point Provider for AS2 and AS4.

In addition to our technical capabilities and the certification of our Peppol Services for Japan, it is essential to understand the culture, language, businesses, market and tax regulations in Japan in order to support our clients best. This is one of the reasons why SEEBURGER works closely with ENDEAVOR SBC Co. Ltd., SEEBURGER’s Japanese partner and representative in Japan.

Our colleagues at ENDEAVOR SBC Co. Ltd. speak Japanese, English and German, and have more than 14 years of experience in the Japanese market. Together, SEEBURGER and ENDEAVOR SBC Co. Ltd. are keen and best-prepared to support our Japanese and foreign clients with Japanese subsidiaries in e-invoicing and other data flow matters.

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[1] cf: https://www.eipa.jp/library/59a542ac4afe427b0dbd94f3/61550d723c9a2a0f3716ff40.pdf (accessed 21st September 2022)

[2] Consumption Tax in Japan is a broad-based tax levied on nearly all supplies of goods and services in Japan. In other countries, Consumption Tax is known as the Value Added Tax (VAT) or Goods and Services Tax (GST). Consumption Tax in Japan is almost the same as VAT in EU countries and GST. See Chapter 5 in https://test-docs.peppol.eu/japan/master/billing-1.0/bis/ (accessed 21st September 2022)

[3] cf: https://www.eipa.jp/library/59a542ac4afe427b0dbd94f3/61550d723c9a2a0f3716ff40.pdf (accessed 21st September 2022)

[4] cf: https://test-docs.peppol.eu/japan/master/billing-1.0/ (accessed 21st September 2022)

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Gerrit Onken

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Gerrit Onken has been at SEEBURGER AG since 2010 as a product manager for software applications and for electronic data exchange services for the business sector. He focuses on solutions for SAP, electronic invoicing (e-invoicing) and innovations for digitalizing business and technical processes for globally-active customers. Originally a banker, Gerrit Onken went on to graduate in business administration, majoring in industrial management and business informatics. After working in the financial sector, he worked as a manager and project manager from 2004 to 2010 for one of the top five corporate consultancies, working with international BPOs in the banking and automotive industries.