News Details
2022.08.31
Preparation for the Invoice System Part 1
The Registration Process
1. Introduction
The Qualified Invoice Retention System (the Invoice System) will come into effect on 1 October, 2023 for Japanese consumption tax purposes. Some businesses have already completed registration and been listed on the website of the National Tax Agency (the NTA). On the other hand, tax-exempt entities such as freelancers or small business enterprises might be under consideration whether they should register as qualified invoice issuers.
The NTA reflected the tax reform for 2022 in “Q&A regarding the Invoice System” on its website. In addition, on 29 July 2022, they updated the contents of “The Invoice System for Claiming Input Consumption Tax (CT) Credit Will Start.” and “Summary of the Invoice System – for Understanding the New System.” In this News, referring to the notices from the NTA, we will mention some of the important issues related to the registration process for the Invoice System.
2. Q&A related to the registration process
The NTA reflected the tax reform for 2022 in “Q&A regarding the Invoice System” on its website. In addition, on 29 July 2022, they updated the contents of “The Invoice System for Claiming Input Consumption Tax (CT) Credit Will Start.” and “Summary of the Invoice System – for Understanding the New System.” In this News, referring to the notices from the NTA, we will mention some of the important issues related to the registration process for the Invoice System.
2. Q&A related to the registration process
In order to become a qualified invoice issuer, you are required to register with the NTA. We mentioned Q&A related to the registration process below.
(1) Registration process (Q 4)
You can submit an application for registration either by paper documents or via e-Tax.
Registration processing times vary depending on the number of applicants at that time.
According to the NTA, it will now take about two weeks to complete the registration process via e-Tax or about one month if you submit a hard copy application.
(2) Should you register or not? (Q 11)
The NTA provides a check sheet that allows you to judge whether you should become a qualified invoice issuer or not in “Summary of the Invoice System – for Understanding the New System.” Although you are required to register with the NTA to become a qualified invoice issuer, the registration is not mandatory for all businesses. That is, you need to judge whether it is right for your business to register, considering tax-status of your customers and other factors. Qualified invoice issuers have to provide qualified invoices at the request of customers. Even if they provide only goods and services to which the reduced tax rate is applied, they are required to issue qualified invoices. On the other hand, it is not required to issue qualified invoices to consumers or tax-exempt entities; therefore, if you have businesses mainly with consumers, you do not necessarily have to become a qualified invoice issuer.
(3) Special treatment of timing or registration for newly established companies (Q12)
In cases where a newly established company is a tax-exempt entity and would like to become a qualified invoice issuer from the start of the business (the establishment date), it is required to submit both the report on the selection of taxable business proprietor and the application for registration by the end of the first taxable period. If a taxable newly established company is a taxable enterprise, it is only required to file the application for registration.
(4) Reversion of registration (Q 14)
A qualified invoice issuer can revert to a tax-exempt entity by submitting the “the application for reversion of registration for a qualified invoice issuer.” In principle, the qualified invoice issuer can revert to a tax-exempt entity from the next taxable period of the taxable period including the submission date for reversion. However, in cases where the application for reversion is submitted within 30 days from the end of the taxable period, the qualified invoice issuer can revert to tax-exempt from the first date of the two years after the taxable period including the submission date.
(5) Special treatment for small-sized business enterprises (Q18)
Due to the special treatment for small-sized business enterprises, businesses whose taxable sales are JPY10 million or less for the base period are exempted from consumption tax filing. However, according to Invoice Circular 2-5, the exemption rule is not applicable to qualified invoice issuers. That is, unless the application for reversion of registration is submitted, the qualified invoice issuer has to continue filing consumption tax returns regardless of the amount of the taxable sales. If necessary, the qualified invoice issuer also has to submit the “report for non-application for the selection of the taxable proprietor.”
3. Conclusion
(1) Registration process (Q 4)
You can submit an application for registration either by paper documents or via e-Tax.
Registration processing times vary depending on the number of applicants at that time.
According to the NTA, it will now take about two weeks to complete the registration process via e-Tax or about one month if you submit a hard copy application.
(2) Should you register or not? (Q 11)
The NTA provides a check sheet that allows you to judge whether you should become a qualified invoice issuer or not in “Summary of the Invoice System – for Understanding the New System.” Although you are required to register with the NTA to become a qualified invoice issuer, the registration is not mandatory for all businesses. That is, you need to judge whether it is right for your business to register, considering tax-status of your customers and other factors. Qualified invoice issuers have to provide qualified invoices at the request of customers. Even if they provide only goods and services to which the reduced tax rate is applied, they are required to issue qualified invoices. On the other hand, it is not required to issue qualified invoices to consumers or tax-exempt entities; therefore, if you have businesses mainly with consumers, you do not necessarily have to become a qualified invoice issuer.
(3) Special treatment of timing or registration for newly established companies (Q12)
In cases where a newly established company is a tax-exempt entity and would like to become a qualified invoice issuer from the start of the business (the establishment date), it is required to submit both the report on the selection of taxable business proprietor and the application for registration by the end of the first taxable period. If a taxable newly established company is a taxable enterprise, it is only required to file the application for registration.
(4) Reversion of registration (Q 14)
A qualified invoice issuer can revert to a tax-exempt entity by submitting the “the application for reversion of registration for a qualified invoice issuer.” In principle, the qualified invoice issuer can revert to a tax-exempt entity from the next taxable period of the taxable period including the submission date for reversion. However, in cases where the application for reversion is submitted within 30 days from the end of the taxable period, the qualified invoice issuer can revert to tax-exempt from the first date of the two years after the taxable period including the submission date.
(5) Special treatment for small-sized business enterprises (Q18)
Due to the special treatment for small-sized business enterprises, businesses whose taxable sales are JPY10 million or less for the base period are exempted from consumption tax filing. However, according to Invoice Circular 2-5, the exemption rule is not applicable to qualified invoice issuers. That is, unless the application for reversion of registration is submitted, the qualified invoice issuer has to continue filing consumption tax returns regardless of the amount of the taxable sales. If necessary, the qualified invoice issuer also has to submit the “report for non-application for the selection of the taxable proprietor.”
3. Conclusion
In this News, we mentioned the registration process for the Invoice System, referring to the notices from the NTA. You should ensure that your business can adapt to the new consumption tax system, considering your business relationships with your customers and your future perspective. With skills and knowledge, ARK can support your registration and tax filing.
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(References)
National Tax Agency (in Japanese)
“Q&A regarding the Invoice System”（Updated in April, 2022）
https://www.nta.go.jp/taxes/shiraberu/zeimokubetsu/shohi/keigenzeiritsu/pdf/qa/01-01.pdf
“The Invoice System for claiming CT credit will start.”
https://www.nta.go.jp/taxes/shiraberu/zeimokubetsu/shohi/keigenzeiritsu/pdf/300416.pdf
“Summary of the Invoice System – for Understanding the New System.”
https://www.nta.go.jp/taxes/shiraberu/zeimokubetsu/shohi/keigenzeiritsu/pdf/0020006-027.pdf
（Accessed on 28 August, 2022）
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(References)
National Tax Agency (in Japanese)
“Q&A regarding the Invoice System”（Updated in April, 2022）
https://www.nta.go.jp/taxes/shiraberu/zeimokubetsu/shohi/keigenzeiritsu/pdf/qa/01-01.pdf
“The Invoice System for claiming CT credit will start.”
https://www.nta.go.jp/taxes/shiraberu/zeimokubetsu/shohi/keigenzeiritsu/pdf/300416.pdf
“Summary of the Invoice System – for Understanding the New System.”
https://www.nta.go.jp/taxes/shiraberu/zeimokubetsu/shohi/keigenzeiritsu/pdf/0020006-027.pdf
（Accessed on 28 August, 2022）
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