With amendments to the Denshi Chōbo Hozon-Hō (Electronic Books Preservation Act), the requirement to retain electronic copies of invoices and other documents pertaining to e-transactions became fully mandatory in January 2024.

This article explores the benefits and drawbacks of digitizing invoices and explains how e-invoices are created.

What’s in this article?

• What is an e-invoice?
  
• Background to the digitization of invoices and the revised Electronic Books Preservation Act
  
• The benefits of e-invoices
  
• The drawbacks of e-invoices
  
• Is an official seal (“inkan”) required for e-invoices?
  
• How are e-invoices created?
  

What is an e-invoice?

An e-invoice is an invoice that has been digitized so it can be sent via email or other means online. It is sometimes also referred to as a web invoice. Compared to the traditional method of sending paper invoices by mail, exchanging e-invoices online can reduce postage costs and improve operational efficiency when it comes to managing invoices and making amendments to them.

E-invoices can also include documents originally created on paper, which have then been scanned and converted into electronic formats such as a PDF.

Background to the digitization of invoices and the revised Electronic Books Preservation Act

One of the main reasons for the growing interest in e-invoices in Japan is the amended Electronic Books Preservation Act, which went into effect in January 2022. The Act allows for the digital retention of ledgers and other documents that must be kept under tax law. Initially enacted in 1998, the Act allowed for ledgers and other documents needed for national tax purposes—traditionally required to be kept in paper form—to be retained digitally, provided certain conditions were met.

After undergoing several amendments, the Act was significantly revised in January 2022. Following the end of a two-year grace period, since January 2024, it has been fully mandatory to digitally retain documents relating to electronic transaction documents (invoices and other transaction-related documents sent via email or other means online).

With the mandatory digital storage of transactions and simplified procedures for digital records, there is growing interest in the digitization of various documents.

The benefits of e-invoices

There are various benefits and drawbacks of implementing electronic invoicing. Let’s start with the benefits.

They reduce costs (including postage)

In Japan, it’s customary to send paper invoices by mail. But by digitizing invoices and sending them via email instead, you can reduce costs involved in postage, printing, and enveloping.

They improve processing times

Sending invoices via email or other means online not only reduces the time spent on printing and enveloping, but also the time needed to deliver them to the recipient.

For businesses with remote working practices, digitizing invoices can also make it easier to review, approve, and issue them with colleagues working away from the office.

They are easy to reissue, amend, and retrieve

In case of errors, or client requests for invoices to be reissued or amended, paper invoices must be reprinted and mailed out again. E-invoices, on the other hand, can be easily corrected and reissued.

Storing e-invoices digitally allows for quick access whenever you need them by using the search functions on your computer.

The drawbacks of e-invoices

The following are some potential drawbacks of implementing e-invoices:

Some trading partners may prefer paper invoices

Invoices affect the issuer and also the recipient. If a trading partner requests a paper invoice, you will need to make individual arrangements for them.

You may incur setup and operational costs, and/or need to revise your internal processes

For businesses that have traditionally managed invoices on paper, introducing e-invoices means revising their internal processes—which may involve costs.

Is an official seal (“inkan”) required for e-invoices?

In Japan, it’s a long-standing practice to apply a seal (“inkan”) to documents, acknowledging their official status. However, it is not a legal requirement to put a seal on invoices. This remains the case even following the introduction of the qualified invoice-based method (“the invoice system”) in October 2023.

How are e-invoices created?

There are various methods for digitizing invoices, ranging from scanning paper documents, creating them using spreadsheet or word processing software, to using specialized solutions.

Stripe Invoicing offers an easy solution for creating and sending invoices online and receiving prompt payment from buyers. Stripe Invoicing is also compatible with “the invoice system,” providing the functionality to create invoices, save a history of modifications, protect against accidental deletion of billed invoices, as well as search for invoices by amount, billing information, and more. It also meets the requirements for the Electronic Books Preservation Act.