Businesses issue invoices to their customers to request payment for goods or services they have provided. Many people who run operations in Japan have experience preparing these documents.

In Japan, the standard invoice requirements include several details; businesses are generally recommended to add items such as the invoice issue date.

This article covers what Japanese businesses must know about invoice dates, why to list them, and how to select the right one. We’ll also discuss how to send statements in a timely fashion, plus other notable points.

What’s in this article?

• Why do businesses in Japan need to include an invoice issue date?
  
• How can businesses in Japan determine the correct invoice issue date?
  
• What invoicing methods are used in Japan?
  
• How has the Qualified Invoice System impacted invoicing practices in Japan?
  
• What to know about the invoice issue date
  
• FAQs about issuing invoices
  
• How invoices promote effective communication between businesses
  

Why do businesses in Japan need to include an invoice issue date?

Here are a few key reasons that businesses in Japan need to add an invoice issue date on their invoices:

They clarify a claim’s date of determination

The issue date of an invoice indicates when the debt is formally recognized. In other words, it marks when the customer’s obligation to pay is confirmed.

The law doesn’t require it, but including an issue date on every invoice is strongly advised. This helps the customer pay the correct amount on time and clarifies when the business recorded the debt and which transaction the invoice refers to. For instance, there have been cases where a buyer received a bill for a March order but mistakenly believed it was for a purchase made in January or February.

Clearly stating the issue date on the invoice helps establish when the debt arose and reduces the risk of confusion in commercial activities.

They help build a sense of transparency

Suppose the business intentionally leaves the issue date off the invoice, despite it being more convenient for the buyer who is responsible for payment. In that case, it can cast doubt on the deal’s authenticity. In the event of a tax audit, the missing entry can make it difficult to verify information, which could prompt tax authorities to question the deal.

For these reasons, while including an issue date on an invoice is not legally required, it is strongly recommended to become standard practice.

How can businesses in Japan determine the correct invoice issue date?

Invoice issue dates are usually determined by the customer’s closing cutoff. As we’ll discuss later, this is the main factor in the credit sales method. Businesses need to communicate clearly and set an issue day in advance.

One notable point: the issue date is not necessarily the day the invoice is sent. Take, for example, an order that was delivered on January 10. Regardless of whether a business prepares one during February, they must still enter January 31 as the issue date for a customer whose closing cutoff is the month’s end. Likewise, the entry would read January 20 if the client’s cutoff is on the 20th.

Closing cutoffs and payment days vary. Some firms set their closing date at the end of the month and pay at the end of the next month. Others might set their cutoff on the 20th and settle at the end of the following month. It’s important for businesses to carefully confirm a customer’s closing date and ensure that the payment cycle is reasonable for them.

What invoicing methods are used in Japan?

Preparing invoices is a central aspect of daily business operations. Create templates that can be reused or used in automatic invoice-generation tools.

There are also two different issuing methods: credit sales and pay-as-you-go. When you issue an invoice depends on the approach. In credit-based billing, the closing cutoff is the main factor for setting the issue date. In the pay-as-you-go, the day the products or services are provided sets the date. Let’s examine these two methods and when businesses need to send an invoice for each option:

The credit sales method

The credit sales system consolidates the total cost of multiple shipments or services provided over a specified period. It’s common in ongoing business relationships, where invoices are issued on a set date each month rather than after every order.

One major advantage of this method is that it cuts administrative workload by eliminating the need to invoice every transaction. However, keeping accurate records, such as the delivery dates and quantities, is important since this information will be needed when requesting payment later. Therefore, providing a shipping slip at the time of delivery is recommended.

In recurring transactions, this approach allows businesses to bill for all activities within a given period at once, simplifying the payment process.

To use the credit sales method effectively, maintain smooth communication and build trust between the buyer and seller. Both parties must fully understand the invoicing process and agree on monthly billing terms in advance.

The pay-as-you-go method

As its name suggests, pay-as-you-go involves issuing an invoice whenever a transaction occurs. This approach is typically used when it is uncertain whether future orders will arise or when the customer has requested a one-time purchase. Unlike the credit sales method, pay-as-you-go requires an invoice after each completed transaction, with payment usually due by the stated deadline.

Preparing an invoice for every order can increase administrative work for the business and the shopper. As a result, it works best for infrequent transactions, such as occasional annual charges or one-off deals. Pay-as-you-go can be a practical choice for a first-time order, but credit sales are typically more efficient for ongoing business relationships.

How has the Qualified Invoice System impacted invoicing practices in Japan?

The Qualified Invoice System was introduced on October 1, 2023, and concerns the application of purchase tax credits. For buyer-side businesses, this affects whether or not the Japanese consumption tax paid at the time of purchase can be deducted, making cooperation between parties key. When preparing statements, understand the framework thoroughly.

First, businesses must meet the system’s criteria to issue a qualified invoice. One requirement is to register as a qualified invoice-issuing company. Only taxable organizations can register; tax-exempt ones cannot send qualified invoices.

Once registered, businesses receive a registration number that must appear on qualified invoices. Compared to regular versions, these documents are more detailed. They must also show totals before consumption tax, or the amount including tax, broken down by applicable rates (e.g., 10% or 8%). Before issuing a qualified invoice, double-check that all fields are accurate and complete.

While no law mandates standard invoices, sellers registered as taxable entities under the invoice system must provide qualified invoices upon purchaser request.

The customer needs to file a tax return using the appropriate consumption tax calculation method to receive a credit. A qualified invoice that meets framework criteria is necessary because qualified invoice–issuing businesses are responsible for any deductions applied to the buyer.

With the introduction of the invoice system, how statements move between parties now significantly affects whether the buyer can apply the purchase tax credit. As a result, review and adjust related processes involved in these transactions.

What to know about the invoice issue date

There are several important points to note when it comes to invoice issue dates:

Reissuing an invoice does not alter the original issue date

If an invoice is missing information or the customer loses it, the business must reissue one without changing the original date. Altering it can confuse the buyer, especially if they later find the original with a different timestamp. This could lead the purchaser to mistakenly believe it’s for a different transaction and possibly make a duplicate payment.

Since the issue date often coincides with the customer’s closing one, any discrepancy from the originally agreed-upon entry can cause additional confusion.

When reissuing an invoice, it’s good practice to identify it by adding a note to the title, such as “Invoice (Reissue),” so it can be matched to the original if it is recovered.

If you accidentally send an invoice with an incorrect issue date, contact the buyer at once to apologize, ask them to return or discard the wrong document, and send a corrected version immediately.

List the agreed-upon issue date, whether it lands on a weekend or holiday

Whether or not the invoice’s issue date falls on a weekend or holiday, do not change it, particularly for the credit sales method. Use the day determined beforehand.

If you send an invoice with a different issue date, correct it to the originally agreed-upon entry and reissue it. In such cases, notify the customer and request replacement.

The retention period for invoices is not calculated from the issue date

Invoices need to be stored safely for a certain period. For corporations the duration is seven years; for sole proprietors, it is five years (or seven for any business subject to consumption tax).

However, the retention period doesn’t begin on the invoice’s issue date. It starts from the deadline for filing the relevant tax return, as outlined below:

• Corporations: Start counting from the day after the deadline for filing a tax return for the fiscal year in question.
  
• Sole proprietors: Start counting from the day after the deadline for filing a tax return.
  

The retention period day is not the same as the issue date, so be careful not to mix them up. Note that the cutoff for filing and paying consumption tax is the same:

• Corporations: Within two months from the day after the end of the fiscal year (the last day of the fiscal month). For example, if the fiscal cycle begins on April 1 and ends on March 31 each year, the payment deadline is May 31.
  
• Sole proprietors: By March 31 of the following year (or the following Monday if it falls on a Saturday or Sunday).
  

While physical storage of documents such as invoices, quotations, and contracts used to be mandatory, the Electronic Books Preservation Act now allows retention in digital form. This can reduce administrative burden on businesses. On the other hand, keeping the records in electronic form is mandatory if they were originally exchanged electronically.

FAQs about issuing invoices

Lastly, let’s look at some frequently asked questions about issuing invoices.

Can the issue day of an invoice be a future date?

The issue day on an invoice doesn’t always match the creation date. Under the credit sales method, both parties agree in advance to align the buyer’s and seller’s closing cutoffs. For pay-as-you-go, the issue day typically reflects completion of fulfillment. Therefore, it’s unlikely the entry will be in the future.

If an invoice is created immediately after fulfillment to align with the closing date, send it consistently at the same time each month following that cutoff. While the cutoff might still be in the future at the delivery time, the invoice must not show a future date, as the buyer’s issue day is upon receipt.

Conversely, if the business is especially busy after delivery, the closing date might pass without the invoice being prepared. Drafting invoices in advance is a good way to prevent this so they can be sent or transmitted at any time.

Once again, while the issue day is not legally mandatory in all cases, it is required in practice. Don’t leave it blank if you’re unsure when to set it. Instead, confirm the appropriate date with the other party to avoid misunderstandings or complications.

Does an invoice need to be issued if there’s a delivery slip?

Delivery slips and invoices serve different purposes. A slip confirms that goods have been delivered and is typically handed to the purchaser at handoff. On the other hand, an invoice requests payment for the offered goods. While no law requires either document, a delivery slip alone is insufficient for the seller to collect remittance. An invoice is necessary to facilitate smooth settlement and signal the business’s intent to bill the buyer.

If the business sends an invoice after fulfillment without attaching a delivery slip, the customer can claim they never received the goods. To avoid such disputes, always hand a delivery slip to the buyer at handoff.

What do I need to do if a seller doesn’t invoice me?

If the seller does not send an invoice for some reason, customers need to request a receipt instead. Like an invoice, a receipt is acceptable as a voucher to prove the details of a transaction. It also serves as evidence that the buyer has paid the seller and that the business has received payment. Customers must always obtain a receipt after settlement.

If an invoice is not received by the end of the year, the person in charge might have simply forgotten to issue it. If you’ve waited a while and still haven’t received one, contact the business by email or phone as a reminder.

How invoices promote effective communication between businesses

This article explored invoice issue dates, including when to send one and what to remember when setting the entry. Although not legally required, adding an issue day is strongly advised to keep transactions clear and organized. It’s important to determine the appropriate entry and timing to maintain a strong relationship of trust with your customers, considering their closing date and the guidance provided in this article.

Online tools can help increase efficiency in the invoicing process. Features such as automated sales tax calculation and accounting software can improve accuracy and efficiency. One option, Stripe Invoicing, complies with the invoice system requirements and enables businesses to issue and store documents properly through its automatic generation feature. With additional tools for managing accounts receivable, collecting payments, and reconciling transactions, it can significantly enhance the effectiveness of back-office operations.