With business transactions, electronic transactions have enabled remote handling while maintaining simplicity and efficiency. This transaction method has become increasingly common in Japan to help business operations run smoothly.

In January 2024, the Electronic Books Preservation Act (also known as the “Electronic Bookkeeping Act”) made it mandatory for businesses to electronically store invoices and other documents exchanged in electronic transactions. Under the Electronic Bookkeeping Act, businesses that actively conduct electronic transactions must fully understand the requirements and prepare their environments accordingly. This applies to businesses and to business partners that handle electronic transactions.

In this article, we explain the basics of electronic transactions, including document storage requirements and methods in compliance with the Electronic Bookkeeping Act.

What’s in this article?

• What are electronic transactions?
  
• What is the Electronic Bookkeeping Act?
  
• Storage requirements for electronic transactions under the Electronic Bookkeeping Act
  
• Methods for storing electronic transaction documents
  
• Compliance with the obligation to store electronic transaction data
  
• Storage methods for nonelectronic data under the Electronic Bookkeeping Act
  
• How Stripe Invoicing can help
  

What are electronic transactions?

Electronic transactions involve exchanging documents required for transactions—such as invoices and receipts—using electronic data rather than paper-based formats. Concrete examples of electronic transactions include the following:

• Email: Attaching files to an email
  
• Cloud services: Exchanging documents through the cloud
  
• Physical recording media, such as DVDs: Exchanging recording media with data stored on it
  
• Homepages or websites: Downloading files from a website
  
• Paperless faxes: Sending and receiving faxes over the internet
  
• Electronic data interchange (EDI) transactions: Exchanging transaction information using an EDI system
  
• Electronic payments: Using electronic payments, such as digitized money (i.e., e-money), credit card payments, and quick-response (QR) code payments and downloading transaction statements provided online by payment service providers
  

The obligation to store electronic data

Since January 2024, the Electronic Bookkeeping Act has required businesses to store electronic transactions (i.e., documents exchanged electronically) as electronic data. Therefore, businesses that issue and receive documents using electronic data must exercise caution when storing them. Documents that require appropriate storage in electronic format under the Electronic Bookkeeping Act include the following:

• Contracts
  
• Invoices
  
• Quotations
  
• Delivery slips
  
• Orders
  
• Receipts
  

What is the Electronic Bookkeeping Act?

The Electronic Bookkeeping Act holds an important and integral position within electronic transactions. It is a Japanese law that dictates methods for the electronic storage of records related to transactions (i.e., the list above) and taxes (e.g., Japanese consumption tax [JCT]).

The key point is that the obligation to retain data electronically applies solely to electronic transactions (i.e., documents that have been exchanged electronically). When documents are exchanged in paper form—such as by mail—there is no obligation to scan the paper documents and save them in portable document format (PDF). In these cases, saving them as electronic data is optional. We will explain so-called “scanner storage” later in this article.

The Electronic Bookkeeping Act also mandates the storage of electronic transaction data to include comprehensive and thorough prevention of document tampering. Regardless of business type or scale, all corporations and sole proprietors are subject to this law. This means businesses that routinely exchange documents via email and other electronic means must ensure they are fully compliant with the Electronic Bookkeeping Act.

On the other hand, if a business—whether a corporation or sole proprietor—does not handle electronic transactions or electronic data, they can continue to retain paper records. They have no relationship with electronic transactions, as defined by the Electronic Bookkeeping Act.

Storage requirements for electronic transactions under the Electronic Bookkeeping Act

The Electronic Bookkeeping Act stipulates requirements for businesses when storing electronic transaction data. Businesses that conduct electronic transactions must ensure they properly address the fundamental principles of the Electronic Bookkeeping Act, which include ensuring authenticity and visibility.

Ensure authenticity

To ensure authenticity in electronic transactions, businesses must take measures to prove that stored electronic data has not been altered or deleted. It also ensures that accurate information is preserved in its original state. To meet the requirements of ensuring authenticity, businesses should take at least one of the following measures:

• Exchange transaction information after applying a timestamp
  
• Apply a timestamp immediately after exchanging transaction information
  
• Implement a system that can verify corrections or deletions to prevent tampering
  
• Establish administrative procedures to prevent corrections and deletions and conduct business in compliance with them
  

Ensure visibility

Businesses can ensure visibility in electronic transactions by storing electronic data so that it can be located, verified, and output whenever necessary. Businesses should meet the following requirements to ensure the visibility of electronic data:

• Install computers, electronic calculators, programs, displays, and printers at the data storage location with operations manuals and ensure prompt retrieval and output of data
  
• Provide an overview document for the computer processing system
  

For efficient searching, implemented search functions must be able to search by the following:

• Transaction date, amount, and customer
  
• Date or amount range
  
• A combination of two or more search items
  

Methods for storing electronic transaction documents

To store documents, businesses should ensure the documents’ data is preserved appropriately and is accessible for viewing whenever necessary. While the Electronic Bookkeeping Act does not specify where documents must be stored, it is important for businesses to clearly designate a location for storing them.

Below, we explain how electronic transaction data should be stored by issuers and receivers.

Issuers

Issuers must store electronic data in its original, electronic state. They should not print out copies of invoices, receipts, and other documents originally issued as electronic data and then delete them.

Receivers

Similar to the above, document receivers should not print out electronic data from the issuer for storage. Instead, they should store the documents as electronic data. Similar to issuers, receivers must avoid deleting or discarding electronic data they receive.

Compliance with the obligation to store electronic transaction data

The purpose of the Electronic Bookkeeping Act is to prevent tampering of stored data. To ensure authenticity, businesses should either implement a system or establish administrative procedures. Below, we provide more information about each approach.

It is important to understand that the obligation to store electronic transaction data is not merely aimed at shifting storage methods from paper to electronic data. Instead, the primary objective is to enhance efficiency through a series of digitized processes.

Implement a system

For a business that conducts electronic transactions, implementing a system that is compliant with the Electronic Bookkeeping Act ensures that it meets the electronic data storage requirements. Implementing a system can also help simplify accounting operations.

Failure to properly store electronic transaction data can result in penalties for both corporations and sole proprietors. Penalties could include additional tax assessments or revocation of approval to use of the Blue Return system, which provides tax and accounting benefits.

To properly store electronic data under the current Electronic Bookkeeping Act, businesses must establish a framework by introducing accounting tools or software that can achieve digital transformation (DX) in accounting operations. These initiatives use digital technology to create new value and improve people’s lives. Businesses considering system implementation should ask the following questions:

• Does this system automatically apply a timestamp in order to ensure authenticity?
  
• What types of supporting documents (e.g., invoices, receipts, etc.) can it support?
  
• Can the system digitize transaction information and use automatic input?
  

Establish administrative procedures

Instead of implementing a system, businesses can establish administrative procedures and operate in accordance with them. The National Tax Agency (NTA) has published sample administrative procedures for corporations and sole proprietors. It is important to remember that all personnel must be thoroughly informed of the procedures and perform their tasks in accordance with them.

Storage methods for nonelectronic data under the Electronic Bookkeeping Act

The Electronic Bookkeeping Act mandates the preservation of electronic data in its original form for electronic transactions. It also permits optional electronic recordkeeping and scanner storage for nonelectronic data.

Electronic recordkeeping (optional)

Electronic recordkeeping is formally referred to as “the system for storing national tax-related books and documents in electronic form.” The electronic recordkeeping system permits storing national tax-related ledgers and documents on computers in electronic data format. These include journals, general ledgers, cash books, financial statements, invoices, and other settlement-related and transaction-related documents. Compliance with electronic recordkeeping for nonelectronic data is optional. This allows businesses to choose electronic storage or printing and storing documents on paper.

Scanner storage (optional)

Scanner storage refers to the practice of scanning copies of paper-based documents created for a transaction (e.g., quotations, invoices, and receipts). This is in accordance with the requirements stipulated by the Electronic Bookkeeping Act that permit their storage as electronic data. Similar to electronic recordkeeping mentioned above, scanner storage is optional. Businesses are allowed to choose to digitize paper documents for storage or store them in paper form.

Here’s how this choice impacts buyers and sellers.

Buyers

Documents received as electronic data (e.g., invoices via email) are considered electronic transactions. They should be stored in their original electronic format. On the other hand, documents received in paper form via hand delivery or mail should be stored as paper documents. To meet the requirements of the Electronic Bookkeeping Act, businesses can also store scanned PDFs of the original documents. In that case, the paper original can be disposed of without any issues.

Sellers

After issuing documents, sellers should retain copies of the originals issued as electronic data in electronic format. However, if a seller issues a document on paper, they can retain paper copies or digitized versions.

Japan’s Electronic Bookkeeping Act includes various requirements and methods for record storage. Businesses that have primarily relied on paper-based document exchanges could find it challenging to adopt electronic transactions in compliance with the Electronic Bookkeeping Act.

To more easily create and store data such as electronic invoices, businesses should consider online tools such as automatic consumption tax calculation features, accounting software, or automated invoice generation tools. Before integrating these tools, businesses should verify that they meet the requirements of the Electronic Bookkeeping Act.

How Stripe Invoicing can help

Stripe Invoicing simplifies your accounts receivable (AR) process—from invoice creation to payment collection. Whether you’re managing one-time or recurring billing, Stripe helps businesses get paid faster and streamline operations:

• Automate accounts receivable: Easily create, customize, and send professional invoices—no coding required. Stripe automatically tracks invoice status, sends payment reminders, and processes refunds, helping you stay on top of your cash flow.
  
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• Reduce back-office workload: Generate invoices in minutes and reduce time spent on collections through automatic reminders and a Stripe-hosted invoice payment page.
  
• Integrate with your existing systems: Stripe Invoicing integrates with popular accounting and enterprise resource planning (ERP) software, helping you keep systems in sync and reduce manual data entry.
  

Learn more about how Stripe can simplify your accounts receivable process, or get started today.