The qualified invoice system (or, “the invoice system”) applies to transactions occurring on and from October 1st, 2023. The new invoice system requires business customers to retain “qualified” invoices to claim input Japanese Consumption Tax (“JCT”) credits on their purchases (“JCT credits”). The details required on a “qualified” invoice in order to receive JCT credits under the “qualified invoice system” will be different from those required for the previous “rate-classified invoice system”.
The purpose of the new invoice system is to accurately clarify JCT amounts and tax rates for transactions by relying on invoices.
The reduced tax rate system implemented in 2019 defines a standard tax rate (10%) and a reduced tax rate (8%). As multiple tax rates for JCT and the JCT credit can result in taxpayers incorrectly accounting for JCT credits, an invoice system that requires the issuing of qualified invoices has been established as a requirement to receive JCT credits.
An “invoice” (or “qualified invoice”) is required to claim JCT credits under the application of the invoice system. By issuing and retaining invoices that meet the designated requirements, JCT can be correctly calculated, and an appropriate JCT credit can be received.
Only “qualified invoice issuing businesses” can issue qualified invoices. Individual business owners and freelancers can register as “qualified invoice issuing businesses” if they apply and are approved by the tax authorities. As this means becoming a JCT taxpayer, the applicant must choose whether to use the simplified taxation system at the time of registration.
A major feature of the invoicing system is that it must process invoices from both sellers (receiving orders/issuing invoices) and buyers (issuing orders/receiving invoices).
Eligible invoices for the invoice system include “qualified invoices” and “qualified simplified invoices.” This support article explains the items that must be listed on a “qualified invoice”. For transactions occurring at retail businesses that sell to multiple non-specific buyers, food and beverage businesses, taxis, and so on, a qualified simplified invoice may be issued in place of a qualified invoice.
To meet the requirements of the new invoice system, qualified invoices must include the “registration number of the qualified invoice issuing business” (or, “registration number”), “applied tax rate,” and “JCT amount for each tax rate” in addition to the items listed on the previous rate-classified invoice.
Taxable businesses issuing invoices must prepare by adding these details to their invoices or making changes to the invoice layout, as well as by using accounting methods that integrate the new system and preparing systems to issue and receive the new invoices.
Stripe Billing and Stripe Invoicing can allow you achieve compliance. To learn more about using Stripe to create qualified invoices, see the docs.
① Issuer name
② Transaction date
③ Transaction details
④ Transaction amount
⑤ If any items are eligible for a reduced tax rate
⑥ Total costs for each tax rate (non-taxed items may also be listed here)
⑦ Registration number: This is the number you should have received after applying to register as a qualified invoice issuer, completing the verification process, and being registered by the tax authorities. These registration numbers are composed of the letter “T” followed by a 13-digit number. To add this field, access the Stripe Dashboard and set the number from the “Manage tax information” section. Select “JP TRN” from the taxpayer items area, input the registration number. To display the registration number on all invoices, set JP TRN as default from "･･･" and save.
⑧ Applicable tax rate: When issuing a qualified invoice, the total amount for each tax rate (8% or 10%) must be recorded separately, and it must also be clearly indicated which tax rate is applied to which total.
⑨ Consumption tax amounts by tax rate: In addition to the total cost grouped by tax rate, which was also required in the previous system, the total consumption tax amount by tax rate is also required. You can set your invoice and subscription tax rates manually in the Dashboard. If you are using Stripe Tax, the tax rate will automatically be set based on the customer's physical and IP addresses.
The qualified invoice system specifies which tax amount rounding logic is allowed. Stripe Invoicing's historical default tax rounding behavior was to apply the tax rate to each line item to calculate a rounded tax amount per line item. This behavior was not compatible with the new invoice system, so we added a new option to apply the tax rate to the subtotal of all line item amounts, and a setting in the dashboard to select which to use. Between Sep 26 (Tue) and Oct 1 (Sun), 2023 we applied the new rounding logic to your invoices, and made the option to change the rounding logic through your dashboard:
With the above settings, amount rounding will be applied to the tax amount calculated by applying the tax rate to the subtotal of all line items.
For platforms that have Custom/Express accounts, some changes on connected accounts and Stripe Invoicing may be required as part of the invoicing requirements. Please refer here for details.