Regulatory updates - Japan

The Japanese government amended the Electronic Record Retention Law (ERRL) in 2021 and has implemented it since 2022. There is a two-year grace period for businesses to adopt changes, including storing their e-documents electronically by January 2024.

How archiving in Japan currently works

Archiving hard copies is common in Japan; however, from January 2024, it is no more allowed for certain documents, such as contracts, orders, invoices, receipts, and other similar documents sent or received electronically. According to the ERRL, taxpayers, including SMEs and sole proprietors, must store their electronic trading documents in an electronic format.

In other words, once businesses receive an e-document, including downloading from the cloud or receiving via e-mail, they must archive it electronically instead of printing it and storing it in paper form.

How to comply with the e-archiving requirements

According to the provisions, businesses can apply timestamps on the sending and receiving documents, have a proper system or create an internal process to ensure documents cannot be edited or deleted. It is also possible to use a system that can keep logs of editing and deleting traceable.

Furthermore, documents archived electronically must provide human readability, and the archiving systems must enable search function by transaction data, such as transaction date, amount, and counterparties.

Pagero’s solutions can help businesses fulfil their business requirements and comply with the ERRL regulations.

These standards listed below were based on the Peppol International (PINT) model:

• Peppol BIS Standard Invoice JP PINT Version 1.01 that is compliant with the Peppol International (PINT) model for Billing;
• JP BIS Self Billing Invoice Version 1.0 is mainly identical to Peppol BIS Standard Invoice JP PINT Version 1.01, which is compliant with the Peppol International (PINT) model for Billing;
• JP BIS Invoice for Non-tax Registered Businesses Version 1.0 compliant with the Peppol International (PINT) model for Billing.

More information is provided by the Japanese E-invoice Promotion Association (EIPA) and Pan-European Public Procurement Online (Peppol)

With the acknowledgement from the Digital Agency following an evaluation, Pagero is now operating as a Peppol Service Provider in Japan.

Read the latest news here.

Japan became the seventeenth Peppol Authority and the fourth outside of Europe. The Digital Agency contributes to reforming the administration culture in a user-driven manner through digitalisation.

Background

Previously, Japanese ministries and agencies governed their regulatory requirements and applicable systems individually, which has created a variety of their own area-specific solutions. This made it challenging for government employees to learn the systems of other ministries or agencies, or even the systems of another division in their own organisation.

The plans of the Digital Agency are to alter the status quo. They intend to intervene with a digital axis across all institutions, which will aim to provide services that are driven not only towards ministries, agencies, laws, or systems, but also towards users, together with an improved user-experience.

What does this mean for Japan?

Becoming the Peppol Authority demonstrates that the Japanese government are serious about digitalisation and see value in the Peppol Network. Furthermore, it means that it is likely that Peppol and its standardised documents will be used and promoted by the government.

As anticipated by the Agency, an introduction of e-invoices will lead to efficiency improvement of back-office business operations and allow the Agency to develop standard invoice specifications based on the global standards used for public-private cooperation.

Pagero in Japan

As previously covered by Pagero, EIPA had released the first deliverables for the country-wide Peppol adoption in Japan, strongly advocating for the network. Moreover, Pagero has recently become part of the EIPA (E-Invoice Promotion Association) together with more than 120 other Japanese and global businesses.

“The Association will contribute to the digitalisation and productivity improvement of the entire commercial transaction through the construction and dissemination of electronic invoice systems that are standardised and optimised overall, and that take into consideration the possibility of transition from the current system and mechanism,” says Koichiro Okamoto, Representative Secretary of the EIPA Council.

Pagero is currently operating in all Peppol markets and will follow the Japanese e-invoicing developments with great enthusiasm.

EIPA has conducted a thorough analysis of the existing Peppol specifications to determine to what extent they fulfil the local market's needs. While some gaps have been identified, it is the Association's strong recommendation for Japan to continue with this standard on a country-wide basis. The priority is to prepare the following electronic documents for the operation in the Peppol network in Japan:

• Invoice
• Summary Invoice
• Delivery Note
• Purchase Order

Pagero is closely monitoring new announcements and developments in Japan. We are expecting more standard specifications regarding e-invoicing to be announced by EIPA soon.

While the government is still to say their word on how Peppol is to be implemented, Japan would become yet another country after Singapore, Australia and New Zealand to roll out Peppol on a country-wide perspective, including both B2B and B2G e-invoicing, and beyond, with the introduction of electronic Delivery Notes and Purchase Orders.

The new Qualified Invoice System that will be effective as of 1 October 2023 will allow taxpayers to claim the JCT input credit from JCT registered vendors (similarly to a VAT invoicing system). Vendors intending to issue qualified invoices will have to register in the local tax offices starting from 1 October 2021 and no later than 31 March 2023.

Japan has not published the format of the new Qualified Invoice System yet. According to the newly established E-Invoice Promotion Association (EIPA), Peppol is likely to become the mandatory infrastructure from October 2023. Before this deadline, EIPA aims to allow businesses in Japan to issue and receive electronic invoices through Peppol in the fall of 2022.

More standard specifications regarding e-invoicing will be announced by EIPA in June 2021.

The EIPA said in a statement, “In the future, we will proceed with a detailed investigation and analysis of the standards set by Peppol and organise the additional requirements for ‘Japanese standard specifications’ and domestic standard specifications of electronic invoices (first edition) by the end of June 2021.”

Background

The Japanese tax system has been poised for updating for a few years now as their consumption tax law has not adopted a VAT invoicing system. Currently, Japanese businesses are required to maintain books and records to support amounts claimed for the credit. It was proposed that the new invoicing system, which is similar to a VAT invoicing system, will come into effect from October 2023.

The EIPA was only established in July 2020 and has hit the ground running. Not only have they expressed their desire to adopt Peppol as a nationwide standard for e-invoicing, but they have also requested the government build an operating system that is easy for businesses to use to accelerate the adoption and utilisation of electronic invoices. The EIPA expects full cooperation from the government and has already submitted recommendations for the development and expansion of e-invoices to Takuya Hirai, Minister for digital transformation.

Timelines

Before the launch of the invoice system in October 2023, the EIPA aims to enable businesses to use software that supports Peppol e-invoicing in the fall of 2022.