Under the introduced Invoice System in Japan, a qualified invoice issuer is a business that has registered in advance with the local Invoice Registration Center in order to issue qualified invoices.
This article covers information on qualified invoice issuers: registration to the Invoice System to become a qualified invoice issuer, notification of the business registration number, and legal obligations as a qualified invoice issuer.
What’s in this article?
- What is a qualified invoice issuer?
- How do I become a qualified invoice issuer?
- What are the main legal obligations of a qualified invoice issuer?
- What items must be listed when issuing a qualified invoice?
- Step-by-step guide for issuing a qualified invoice
- What if I do not register as a qualified invoice issuer?
What is a qualified invoice issuer?
In order to issue qualified invoices under the Invoice System, it is key to first apply for registration as a qualified invoice issuer. The Invoice System started on October 1, 2023. Under the system, businesses that want to apply the purchase tax credit for consumption tax must issue and retain qualified invoices that satisfy requirements of the Invoice System.
Once a business has been registered as a qualified invoice issuer, it is approved by the Japanese government to issue qualified invoices. That is when a registration number will be assigned to the business. Thus, a qualified invoice issuer can also be described as “a business with a registration number in the Invoice System.”
Therefore, a qualified invoice can only be issued by a qualified invoice issuer with a registration number in the Invoice System. A qualified invoice cannot be issued by a business that has not completed registration as a qualified invoice issuer.
Once you become a qualified invoice issuer after applying for registration to the Invoice System, information such as the name, location, and registration number of your business will be displayed on the Japanese National Tax Agency’s web page of qualified invoice issuers. Public disclosure on this website makes it possible to confirm the correct registration number. This prevents problems such as misuse of false registration numbers and misidentification of registration numbers. When disclosing information on a sole proprietorship as a qualified invoice issuer, the address will not be displayed unless the sole proprietor requests display.
How do I become a qualified invoice issuer?
Eligibility for becoming a qualified invoice issuer does not depend on the type of business (sole proprietorship, freelance, corporation, etc.). In other words, any business can become a qualified invoice issuer if the application for registration in the Invoice System is approved.
However, in principle, only businesses that pay consumption tax can issue a qualified invoice. This means that if your business becomes a qualified invoice issuer, it will become a taxable business.
You can apply for registration as a qualified invoice issuer by mailing your application to the Invoice Registration Center or via e-Tax. For information on how to apply and examples showing what to enter on the registration application form, refer to the National Tax Agency’s instructions on how to apply for registration as a qualified invoice issuer business in Japan.
What about tax-exempt businesses?
Generally speaking, a tax-exempt business is not eligible to become a qualified invoice issuer. However, becoming a qualified invoice issuer is not a requirement; rather, it is optional. If you are a tax-exempt business, such as a sole proprietorship with annual sales of no more than ¥10 million, you need to have a good grasp of the Invoice System before deciding whether to become a taxable business by applying for registration as a qualified invoice issuer.
Note that if a tax-exempt business applies for registration as a qualified invoice issuer, it will automatically become a taxable business and incur the obligation to pay consumption tax.
What are the main legal obligations of a qualified invoice issuer?
A qualified invoice issuer who has successfully applied for registration in the Invoice System is required to consent to requests from business customers (buyers) for issuance of a qualified invoice. The issuer must deliver to the buyer an invoice that satisfies the requirements for qualified invoices under the Invoice System.
In addition to issuance and delivery, the issuer must retain a copy of the delivered qualified invoice. In regard to copies of delivered qualified invoices, the National Tax Agency stipulates that the issuer must retain a copy for seven years dating back to two months following the last day of the taxable period to which the issuance date belongs. From January 1, 2024, under the Electronic Books Preservation Act, qualified invoices issued and delivered using electronic data must be retained in data format, rather than as paper.
In addition, if the issued qualified invoice contains an error, the qualified invoice issuer is legally obligated to redeliver a corrected qualified invoice.
As a special exception, a business may be exempt from the obligation to deliver a qualified invoice—for example, for public transportation of passengers at a fare less than ¥30,000, and for transactions involving vending machines and other automated service equipment when delivery of an invoice would be difficult. For more details, refer to the National Tax Agency’s overview of methods for retaining qualified invoices.
What items must be listed when issuing a qualified invoice?
When issuing a qualified invoice, the first important step is to satisfy the requirements defined in the Invoice System. The following are required items to be listed on qualified invoices, as specified by the Japanese National Tax Agency:
- Personal name or business name of the qualified invoice issuer
- Transaction date
- Transaction details (if the item is eligible for a reduced tax rate, clearly state that fact)
- Personal name or business name of the recipient (buyer)
- Registration number as a qualified invoice issuer
- Total amount classified as tax-excluded prices or tax-included prices at each tax rate (8% and 10%), and applicable tax rates
- Consumption tax classified by tax rate, and total amount of consumption tax, by respective tax rate
As noted above, you must list your registration number on the qualified invoice under the current Invoice System. Therefore, it is important to complete your application for registration and receive the registration number before issuing a qualified invoice. Once you have completed registration, you will be notified of your registration number by the tax office. After receiving the notification of your registration number, keep it in a safe place.
In order to issue qualified invoices compliant with the Invoice System, an automatic sales tax calculation function can be used to improve efficiency of the business. Stripe offers a variety of useful features and tools, such as Stripe Tax and Tax Rate, which support qualified invoices and allow you to automatically calculate sales tax. You can refer to our invoice compliance guide and best practices doc to learn more about the Invoice System and how to set up a qualified invoice.
Step-by-step guide for issuing a qualified invoice
Below, we will look at the steps to become a qualified invoice issuer and issue qualified invoices.
1. Fill out the application form for registration
To obtain a registration application form for mailing, you can download and use the National Tax Agency’s application form for registration as a qualified invoice issuer. You can also apply for registration by e-Tax.
2. Prepare attachments
If you are a sole proprietorship, a copy of your Individual Number Card (My Number Card) is required when mailing the application form for registration as a qualified invoice issuer. If you do not have an Individual Number Card, prepare a copy of your Individual Number confirmation document (notification card) and a copy of your ID (driver’s license, etc.). If you submit your application via e-Tax, prepare an electronic certificate (Individual Number Card, etc.) and a user identification number (the 16-digit number for electronic tax return). For a corporation, it’s a good idea to have on hand information such as the representative, location, and corporate number to enter them correctly when filling out the application.
3. Submit the application for registration
When applying for registration by mail, confirm the address of the Invoice Registration Center, which is the submission destination. Then, enclose and submit the registration application form and the necessary attachments.
4. Receive notification of registration number
The registration number of the qualified invoice issuer is an important number that must be listed on qualified invoices. After receiving notification of your registration number, keep it in a safe place. If you mailed your registration application, you will receive notification in written form. If you applied and asked for notification through e-Tax, you can receive notification through e-Tax. Note that even if you apply via e-Tax, the registration notification will be sent in paper form unless you specify otherwise. Therefore, be sure to state your preference on the confirmation screen during the application process.
5. Create qualified invoices and deliver them to buyers
When creating a qualified invoice, check that you correctly entered the required items before you deliver the invoice to the buyer. In particular, when necessary, check your registration number by referring to the website of qualified invoice issuers.
6. Retain copies of qualified invoices
As mentioned above, you are obligated to retain copies of qualified invoices for seven years or longer. Also, keep in mind that the Electronic Books Preservation Act requires you to retain qualified invoices in data format if they have been delivered as electronic data.
What if I do not register as a qualified invoice issuer?
If you do not register as a qualified invoice issuer, you are not allowed to issue a qualified invoice. Therefore, buyers who are your customers cannot receive a qualified invoice and cannot obtain a purchase tax credit. Ultimately, this increases the consumption tax paid by the buyer. To avoid such a negative impact on your buyers, it is important for both parties to understand each other’s positions and discuss their future intentions.