Japan implemented the Invoice System on October 1, 2023. On January 1, 2024, the storage of electronic data became mandatory under the Act on Special Provisions concerning Preservation Methods for Books and Documents Related to National Tax Prepared by Means of Computers (also known as the “Electronic Books Preservation Act”).

Documents issued in accordance with the Invoice System (qualified invoices) require buyers to provide supporting records to claim purchase tax credits, and they must be kept and maintained in accordance with the Electronic Books Preservation Act.

This article outlines the relationship between Japan’s Invoice System and the Electronic Books Preservation Act, and introduces the approaches for retaining invoices in line with the law. Finally, we will explain the advantages of complying with both. Please note that throughout this guide, the term “invoice” uniformly refers to “qualified invoices.”

What’s in this article?

• What is the Invoice System (storage methods for qualified invoices, etc.)?
  
• What is the Electronic Books Preservation Act?
  
• Relationship between the Invoice System and the Electronic Books Preservation Act
  
• Electronic Books Preservation Act–compliant invoice storage methods
  
• Advantages of supporting both the Invoice System and the Electronic Books Preservation Act
  
• Improving the efficiency of invoice work
  
• How Stripe Invoicing can help
  

What is the Invoice System (storage methods for qualified invoices, etc.)?

The Qualified Invoice System enables input tax credits across multiple consumption rates and applies when businesses subject to consumption tax calculate their amounts.

Required details to include on invoices

Compared with the rate-classified invoices that were used before the Invoice System, the required specifics have become more extensive.

The system also includes simplified invoices that carry the same legal effectiveness as standard ones, though only certain industries accept their use. Refer to the following for details on each item:

Within the Invoice System, “invoice” collectively refers to any supporting documentation used to apply input tax credits—acceptable options include receipts, purchase slips, delivery notes, and purchase statements.

The system doesn’t set a specific format, allowing flexibility as long as the records meet its criteria. However, to qualify for the input tax credits, it is necessary to use a qualified invoice format that properly reflects the buyer’s information.

Issuance by qualified registrants

Only businesses registered in advance as a qualified invoice issuer under the Invoice System are permitted to dispense invoices; those without registration are unauthorized to do so. Operators filed as qualified invoice issuers on the National Tax Agency (NTA) website are assigned an Invoice System registration number.

Note that levy-exempt operators, including sole proprietors, are eligible to register. That said, once enrolled, they automatically become taxable operators and are required to pay consumption tax. Therefore, sole proprietors need to carefully weigh advantages and drawbacks of adhering to the Invoice System. If they choose to register, they must carefully manage remittances to avoid any negative impact on their profits.

What is the Electronic Books Preservation Act?

The Electronic Books Preservation Act is a law that stipulates methods for storing digital data for accounting books and records pertaining to national levies and transaction-related documents (such as invoices and receipts).

Storing transaction in digital form

As said earlier, from January 2024, the Electronic Books Preservation Act requires that “electronic transactions,” namely invoices and receipts exchanged as digital data via email or the cloud, must be archived as digital records.

Requirements of the Electronic Books Preservation Act

When retaining digital info, it is key to store it in a manner that satisfies the requirements of the Electronic Books Preservation Act. These can vary depending on the size of the entity, so it is important to check the NTA’s special website beforehand to understand the applicable retention rules. Additionally, Stripe’s own guide on the Electronic Books Preservation Act provides detailed specifics about the standards.

Relationship between the Invoice System and the Electronic Books Preservation Act

The Invoice System and the Electronic Books Preservation Act are separate frameworks. Still, all documents managed within the system—such as invoices and receipts—are classified as transaction records subject to the Act. Accordingly, they have to be processed and retained in compliance with that law. As noted in the “What is the Electronic Books Preservation Act?” section, invoices issued or received electronically need to remain as digital data rather than on paper.

As a result, the Electronic Books Preservation Act is closely connected to and has a significant impact on the Invoice System, influencing how documents must be stored pursuant to its data retention standards. If you do not comply with the Act and invoices are kept improperly, the purchaser loses eligibility for their input tax deductions. Sellers and the buyers are expected to observe the Invoice System and maintain records that adhere to the Electronic Books Preservation Act.

Electronic Books Preservation Act–compliant invoice storage methods

The Invoice System does not set particular rules for storing invoices, which might suggest it’s possible to keep either hard copies or digital versions. That said, as stated earlier, invoices fall within the Electronic Books Preservation Act and therefore must align with both that law and the Invoice System.

Handling invoices in paper form

For invoices initially exchanged on paper, businesses have the option to either retain them in physical form or digitize and archive them electronically. In other words, because digitization is optional rather than mandatory for paper documents, retaining physical versions poses no problem.

On the other hand, if a business wishes to keep paper invoices as digital data, this can be done by “scanner storage” under the Electronic Books Preservation Act. Scanner storage is a method of scanning transaction-related records, such as printed invoices, and storing them as electronic data in line with specific conditions stipulated by the NTA.

Handling invoices in electronic form

As mentioned above, electronic transaction documents have to remain in digital form, meaning each party must keep the data in its original electronic format.

Below are some of the main types of electronic transactions. All of these are subject to the Electronic Books Preservation Act, so be sure to check whether your company’s transactions fall under any of these categories:

• Attaching documents to emails
  
• Downloading files from websites
  
• Documents exchanged over the cloud
  
• Card information (e.g., credit card statements, IC card payment data)
  
• Data saved to physical media such as DVDs
  
• EDI (electronic data interchange) transactions, a system for electronically and automatically exchanging business-oriented documents between companies and organizations
  

Advantages of supporting both the Invoice System and the Electronic Books Preservation Act

In simple terms, supporting the two frameworks at the same time means transitioning work on invoices to electronic data.

As noted in the “Electronic Books Preservation Act–compliant invoice storage methods” section, records initially exchanged as hard copies also can be kept as digital files. This change presents an ideal opportunity for organizations that have relied on paper to transition to paperless workflows and improve their back-office processes.

While the Invoice System and the Electronic Books Preservation Act are different, they are two legal frameworks pertaining to invoices. For that reason, most finance platforms introduced by business operators are capable of supporting both.

When handling digital data, it is necessary to adhere to the requirements of the Act. Yet, by digitizing and centralizing all invoice-related activities, you can not only issue and store them but also simplify operations, data management, and accounting duties, making all these tasks more efficient and ultimately saving time.

For example, your company can solve the problems below by switching to electronic invoicing:

• Automating invoice creation prevents human errors such as data entry mistakes and omissions.
  
• By meeting the standards of two legal systems together rather than individually, you reduce the time and effort required for invoicing.
  
• By standardizing retention in electronic data, the coexistence of multiple storage options (hard copy and digital) is eliminated.
  

In this way, introducing a platform that simultaneously complies with the two systems will improve the productivity and efficiency of the entire organization.

Improving the efficiency of invoice work

In this article, we outlined the relationship between the Invoice System and the Electronic Books Preservation Act.

To follow current regulations, the seller and the buyer alike have to take appropriate measures. In particular, sellers responsible for creating and delivering invoices need to ensure that every step—from issuance to retention—operates smoothly and efficiently. Hence, it is of utmost importance to introduce a platform that supports the two frameworks together, and to establish the necessary infrastructure in advance.

Also, when creating invoices, consider introducing online tools that enhance workflow, such as automatic consumption tax calculation functions and accounting software, as they are highly convenient. The Invoice System and the Electronic Books Preservation Act each set specific requirements for handling documents, so businesses must prepare ahead of time to comply with both legal systems. Once preparation is complete and implementation is underway, finance processes need to proceed smoothly.

How Stripe Invoicing can help

Stripe Invoicing, provided by Stripe, supports both the Invoice System and the Electronic Books Preservation Act, enabling businesses to issue and store invoices appropriately using automatic generation. Furthermore, because it provides all functions related to billing workflows, such as accounts receivable management, payment collection, and transaction reconciliation, operations can improve their back-office processes to be smoother and more efficient.

Stripe Invoicing also 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.
  
• Accelerate cash flow: Reduce days sales outstanding (DSO) and get paid faster with integrated global payments, automatic reminders, and AI-powered dunning tools that help you recover more revenue.
  
• Enhance the customer experience: Deliver a modern payment experience with support for 25+ languages, 135+ currencies, and 100+ payment methods. Invoices are easy to access and pay through a self-serve customer portal.
  
• 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.