Introduction of Invoice Method Under the Consumption Tax Law

Kikuya Masato

doi:10.24677/riim.20.0_47

<p>Consumption tax which was promulgated by the Consumption Tax Law in December 1988 and then was implemented in April 1989 is an indirect tax charged on the supply of a wide variety of goods and services excluding oil, alcohol and tabacco. Consumption tax in Japan is charged at each stage of the production and distribution process and is also a value added tax (VAT) in that tax due should be borne by the final consumer of the product. VAT is a multi-stage general consumption tax which traders are required to charge on their sales and must report the output taxes charged on sales to tax authorities, but they can claim refunds from the tax authorities of the input taxes which they pay on their own purchases. In Japan, an account method has been used as the method of determining the amount of tax credit for input taxes paid on purchases on the basis of accounting books since the consumption tax was first implemented. From 1^st October 2023, the tax credit method will change to an invoice method in which output tax charged on sale is deducted from input tax paid on purchase, basing on invoices. An incvoice must be normally issued when one tax-registered trader supplies a taxable product or service to another tax-registered trader. This article compares the characteristics and the issues arising in an account method and an invoice method.</p>

Introduction of Invoice Method Under the Consumption Tax Law

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