Information on Amendment to the Act on Electronic Preservation System for Books and Documents Related to National Taxes in Japan

HLS GLOBAL CO., LTD.

HLS GLOBAL TAX CORPORATION

HLS GLOBAL Social Insurance and Labor

Advisory Corporation

As part of the 2021 tax reforms, the Japanese National Tax Agency has made amendments to the Act on Electronic Preservation System for Books and Documents related to National Taxes, and this will take effect on January 1st, 2022.

These drastic amendments are being made in order to improve productivity by digitization of accounting processes, promote remote work and improve bookkeeping methods through the utilization of cloud-based accounting software. Before the new regulations are enforced, and for further details, please refer to the National Tax Agency website (in Japanese only), Electronic Preservation System for Books and Documents.

<Definition of ‘Electronic Books and Documents’ >

Any document related to a commercial transaction, in digital form conveyed to/from a third-party, where the document includes a purchase order form, contract, invoice, receipt, quotation, or any other similar document(s) that clarifies the details of a transaction. Electronic transactions are considered to be those transactions where the transaction information is exchanged using electromagnetic systems or any transactions via ‘Electronic Data Interchange’ (EDI transaction) including E-Mails (attachments included), or any transactions done through a portal website on the internet.

<Examples of Electronic Books and Documents>

  1. Invoice, receipt sent via email (PDF format included) 
  2. Invoice, receipt downloaded or captured on a webpage
  3. Electronic invoice, receipt, received via a cloud-based system 
  4. Credit card or IC/Debit card statement downloaded on a cloud-based system or through a mobile phone application 
  1. Electronic Data Interchange (EDI transaction)
  2. Data from a multifunction copy-scanner-fax machine
  3. Data of invoice or receipt, received via electromagnetic recording media such as DVD etc.

<Requirements>

Electronic books and documents related to National Taxes are required to be preserved in the same format as received. To maintain constant reliability, meeting one of the below requirements has been regulated.

  1. Receiving electronic documents with a Time-Stamp
  2. Prompt Time-Stamp on the received documents (or promptly after the normal period of operation)
  3. Editing, correction and/or deletion of these electronic documents is disabled 
  4. Administrative policies are established to prevent any editing, correction and/or deletion of these documents
  5. Operation manuals for Computers, Programs, Printers, Scanners etc. are available at the storage location
  6. All electronic documents have a ‘Search’ functionality available 

Please note that the above requirements shall be applicable even to those companies that have still not installed an electronic accounting system. A company without an electronic accounting system cannot be regarded as an exception. 

<Time-Stamp>

The Japan Data Communication Association certifies some entities who have implemented time authentication with the purpose of raising reliability. Since these certified entities are granted ‘Time Business Reliability Certificate’, it can be judged whether the entity has been authorized or not by this certification mark.

Japan Data Communication Association 

<Points to be Considered for Electronic Data Preservation>

Any commercial transaction in a digital form must be preserved with prescribed general information such as date, vendor name, billed/estimated amount.

Please note the following while saving data.

  1. <Examples of Electronic Transactions> Regarding points (1) and (2) mentioned in the ‘Examples of Electronic Books and Documents’ above, editing, correction or deletion of data is generally considered to be possible if the data received is without a Time-Stamp. Thus, it is necessary to add a Time-Stamp by the recipient, or properly manage the data based on ‘Transaction Regulations’. In addition, since the electronic data preservation is required to be saved with a ‘searchable functionality’, keeping only the E-mails with the relevant attachments would not be a sufficient method to meet this requirement.
  2. <Examples of Electronic Transactions> Regarding points (3) and (5) mentioned in the ‘Examples of Electronic Books and Documents’ above, if the system has disabled editing, correction and/or deletion of data related to the transaction (date of issue, vendor name, amount etc.) and keeps a record of any edits, corrections and/or deletions, it is considered to meet the requirements for preservation of electronic documents. On the other hand, if the system downloads and saves the data temporarily, it is necessary to follow the guidelines as mentioned in point 1 above.
  3. <Examples of Electronic Transactions> Regarding points (6) and (7) mentioned in the ‘Examples of Electronic Books and Documents’ above, it is generally considered possible for the recipient to edit, correct and/or delete the data. However, a time-stamp is required to be added to the received data or properly manage the data based on ‘Transaction Regulations’. In addition, since the electronic data preservation is required to be saved with a ‘searchable functionality’, keeping only the E-mails with the relevant attachments would not be a sufficient method to meet this requirement.

<Searchable Conditions>

The following examples should be considered to meet the requirements for preservation of electronic documents.

  1. As per the electronic data preservation regulations, the invoice data (PDF) should display the following content and in the stipulated format as below. 

Ex.)Invoice of JPY 110,000 billed by National Tax Co., Ltd., received on October 31st, 2021

→This should be titled as ‘20221031_ National Tax Co., Ltd. _110,000’

  1. The transaction documents should be stored in a categorized folder by each month or by the specific vendor folder.
  2. Rules for ‘prevention of editing, correction and/or deletion without a justifiable reason’ should be created and implemented. This regulation is required as a necessary measure to ensure authenticity and reliability of all electronic transaction records. Please click here to see more reference materials and samples of such regulations.

If the gross sales revenue during the consideration period (usually 2 years) is JPY 10 Million or less, and are able to comply with the download request from the tax assessment officer, the invoice data content as mentioned in point 1 above is not necessary.

<Points to be Noted>

As of January 1, 2022, printing and storing of electronic documents related to national tax will not be considered as a proper preservation method. In other words, all electronic data needs to be saved as it is. In case the electronic documents related to national tax are not preserved according to the prescribed regulations, the company’s approval of the ‘blue tax return’ may be revoked. 

※ The revocation of the ‘blue tax return’ approval may be decided after considering the seriousness of violation of the Act on Electronic Preservation System for Books and Documents related to National Taxes. 

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[Source: National Tax Agency,]

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