Contributed by Shimada & Associates International Tax Consulting Office, Japan

Under the current JCT Act, business entities are allowed to calculate the JCT amount based on the businesses’ books and records in general. Sellers don’t require to issue Tax invoice stated the JCT rate and amount.
A new invoice system for consumption tax will be introduced on 1 October 2023.
Taxpayers will be required to retain “Qualified invoices” which fulfil certain conditions in order to deduct JCT amount that they paid on taxable purchases from JCT amount they charged their customers. To be registered and get registration numbers so as to issue qualified invoice (“registered issuers”), the forms for registration must be submitted to tax offices from 1 October 2021 to 31 March 2023.
From 1st October 2023, registered invoice issuer must provide qualified invoices stated required information as follows to taxable customers.

  • Supplier’s name and registration number
  • Transaction date
  • Description of goods or service
    (Goods or service subject to the reduced rate must be described separately)
  • Invoice amount (included tax or excluded tax) for each tax rate and Applied tax rate
  • Consumer’s name

Taxpayers will not be permitted to claim JCT credit on purchases from JCT exempt persons such as small enterprises or freelancers. Taxpayers may need to review current transaction with exempt persons because the impact will not be small if taxpayer can’t claim JCT credit on purchases from exempt persons.
The number of submitted application to be registered has added up to 103 thousand from the start of application last month. It is told that most of applicants are JCT taxpayers but certain number of current exempt persons already applied. According to the past statement in Diet, 1.6 million exempt persons out of estimated 4.8 million current exempt persons are expected to decide to be JCT taxable. How much the number of exempt persons who choose to be taxable and registered to issue qualified invoice will come up from now on is paid attention to.
This new system may force business persons to review their supply chains, contract and IT system for issuing and retaining qualified invoices. And they need making appropriate steps to prepare for the new system by 1st October 2023.

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