The invoice system will start in Japan from 1 October 2023. Providers of telecommunications services should also register as eligible billing business operators.

In Japan, the invoice system will start on 1 October 2023. For people in European countries, you can think that it is the same as the familiar VAT (Value Added Tax) invoice method.

Foreign-affiliated parent companies that have subsidiaries in Japan are also familiar with the system, so the registration of eligible invoice issuers and correspondence to the new system of accounting systems are progressing smoothly without any discomfort.

However, it may be necessary to provide a sufficient explanation to the parent company in the United States, where the invoice system has not been introduced.

On this page, even those who are providers of telecommunications services, whose taxable sales in Japan are less than JPY10M, and who are not taxable businesses, can apply for eligible claims under the invoice system starting on 1 October 2023.

We will consider whether it is better to register as a certificate-issuing business and allow customers to claim purchase tax credits for consumption tax.

Background: From 1 October 2015, the Japanese consumption tax will be levied on "providing telecommunications services" from overseas.

For details of the system, please refer to the commentary page of the National Tax Agency [Regarding the taxation of consumption tax related to the provision of cross-border services].

What's the issue? : Customer needs invoice number for the purchase tax credit.

Until 30 September 2023, we ensured the taxation of consumption tax on the sales side by imposing the “foreign business declaration tax method” and the “reverse charge method” on the service provider side. It was able to take a tax deduction.
However, from 1 October 2023, if the service provider does not have a "qualified invoice issuing business registration number", the customer will not be able to claim the purchase tax credit.

1. If you are already a taxable person

If taxable sales in the base period exceed JPY10 M and you have already filed a consumption tax return as a taxable business, regardless of whether or not you are registered as a qualified invoice-issuing business, you will be required to file a consumption tax return anyway. Therefore, there is no problem in registering a qualified billing business registration number.

2. For tax-exempt businesses

Businesses with domestic taxable sales of JPY 10 M or less who are eligible for the tax exemption system will now be required to choose whether or not to register as qualified invoice-issuing business operators.
As of April 2023, half a year before the start of the invoice system, we have already received inquiries from domestic customers asking "What is your invoice issuer number?"

Which of the following should your company choose?
■ Are you replying that due to the tax exemption entity and would tell to the customer that you would not register to the invoice number system?
■Are you aware that it will take more time and consuming procedures to file and pay consumption tax after registering the invoice number system?

The correct answer will change depending on the business judgment of each business operator.
At our firm, "After fully considering the business content and business environment of each company, we will make several proposals, and ultimately respond to the new system based on the customer's business judgment. We will monitor and discuss and correct the trajectory."

Video conference discussions with the home country CFO are useful.