Indirect Tax News - December 2020

Introduction of new Japanese Consumption Tax system - The Japanese tax-qualified invoicing method

A new, mandatory consumption tax invoicing system will begin in Japan on 1 October 2023. To allow businesses time to implement the new invoicing system, application of it will start four years after the introduction of multiple consumption tax rates. When the new invoicing system begins it will be called the “tax-qualified invoice method”. This method will be required for Japanese Consumption Tax (JCT) payers to preserve tax-qualified invoices issued by registered suppliers for tax credits.


The consumption tax rate increased from 8% to 10% on 1 October 2019. At the same time, Japan introduced multiple rates with a reduced tax rate of 8% applied to certain transactions, including sales of food and newspapers under subscription contracts. As a result of these rate changes, Japanese businesses had to update or amend their system to calculate the multiple consumption tax rates correctly and appropriately.

The invoicing system that will be required as of 1 October 2023 is similar to that widely adopted in European countries. The invoicing system will ensure that the creditable tax amount can be calculated properly, given the multiple tax rates.

Specifics of invoices under the new invoicing system

Eligibility: A JCT payer will have to apply to the Japanese tax authorities as a registered supplier that is eligible to issue tax-qualified invoices.

Requirement: Currently, certain information is required to be listed on invoices. The list below shows invoice information, with the items in bold represent information that will be specifically required when the tax-qualified invoice method applies:

  • Name and identification number of the registered supplier;
  • Date of the taxable supplies;
  • Description of the taxable supplies and if they are subject to the reduced tax rate, a statement clarifying this must also be included;
  • Consideration for the taxable supplies by tax rate and applicable tax rates;
  • Amount of consumption tax; and
  • Name of the purchaser.

The JCT registered supplier application form can be submitted after 1 October 2021. As mentioned above, the invoicing method will start on 1 October 2023 and, in principle, it will be necessary to submit the application form by 31 March 2023.

One other point worth noting is that currently, entities that meet the conditions for being a JCT exempt enterprise (those with taxable sales of 10 million Yen and less during the base period) are not required to file a consumption tax return, nor do they need to pay consumption tax. If JCT exempt enterprises collect consumption tax from their customers, the exempt enterprise treats the consumption tax collected as profit. Once such an enterprise becomes a registered JCT payer, however, they will no longer be treated as a JCT exempt enterprise (regardless of their level of taxable sales) and, once registered, the supplier will be obliged to submit a consumption tax return.

Kenichiro Kishi

Yuriko Fukutake