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Top Page > List > Dialogue with Mr.Kato (Japan Digital Agency) Part 2 (2021.10.27 wed)

2021.10.27 wed

Dialogue with Mr.Kato (Japan Digital Agency) Part 2

(Atsuya Sugawara) QMS International is now a member of EIPA (E-Invoice Promotion Association in Japan). What does the Digital Agency expect from overseas companies like QMS International as a member of EIPA?

 (Hiroyuki Kato) EIPA is a private organization initially established by 10 accounting Japanese software and ERP vendors. It is an important partner for us. The number of membership requests has been increasing so rapidly. However, most of these requests still come from Japanese businesses. I am personally concerned about it, because it is essential for Japanese members to be aware of the latest global e-invoice trends. I am sure that QMS International will blow a new wind towards EIPA members by giving your competence as a European solution provider.

 (AS) In fact, the center of the e-invoice discussion is in Europe, including Peppol. However, it is not enough for overseas companies to start business in Japan only with the knowledge of the European standards. It is quite important even for overseas companies to correctly understand Japan country specification. Could you explain its basic idea and concept? 

(HK)  First, you need to understand that, in Japan, “E-Invoice” means “B2B Tax Compliant E-invoice”. In this context, “Tax” is “Japanese Consumption Tax”.After implementing the “Qualified Invoice Based method” for input tax credit purpose, the Japanese Consumption Tax will be almost the same as EU VAT even though there are some differences when examined in detail.Therefore, I am sure that the basic idea and concepts of Japan country specification (in accordance with Japanese Consumption Tax law) cannot be so hard for overseas companies to understand.

(AS) I heard the draft of the Japan country specification was made based on the draft of PINT (Peppol International Invoice Model). At the Exchange Summit 2021 in Vienna, Open Peppol also mentioned that “Japan will be a first country to make its own country specification based on PINT”. Could you let us know why Japan has chosen such a new approach to make the country specification?

 (HK) That’s a good point. You raised. To explain this, I’ll give you an example of “Tax amount” required in an invoice, so that we can clearly find a difference between EU VAT and Japanese Consumption Tax. Under the EU VAT, “Invoice Total Tax amount in local currency”must be shown in the tax invoice, and BIS Billing 3.0 supports it. On the contrary, Japanese Consumption Tax law requires “Tax amount per tax rate in local currency”in the Qualified Invoice. Unfortunately, BIS Billing 3.0 doesn’t support it. So, we found the necessity to modify BIS Billing3.0. However, the reality was not so simple. As you know, BIS Billing 3.0 is already in operation, therefore, it was tough to modify it in accordance with all Japanese requirements. Considering such limitations, we decided to abandon BIS Billing 3.0 as a base of our new country specification. Consequently, we have decided to make it based on the draft of PINT, since PINT is a new international specification without the concept of EU VAT. 

 (AS) I can easily imagine there were a lot of twists and turns. Anyway, PINT will be a part of the Peppol standard specifications, which enables an interoperable exchange of e-invoices. Could you explain other key points of Japan country specification, if any?

 (HK) In Japan country specification, “Invoice line document identifier” (ibt-188) and “Document type code” (ibt-189) are added to the data model of PINT. Even if these elements are not required on a Qualified Invoice, we added them to meet existing business operational customs or requirements. In back-office operations of Japanese businesses, it is quite common to double-check that information in each line if it corresponds to the information of all other documents, such as the order note, the purchase note, and the delivery note. I am sure that business operations will get a lot more efficient when processed digitally.

(AS) This is not so easy to be understood by all of us. Checking all the information of each invoice before proceeding to payment is fundamental and every company has its own internal established operations. I guess, it would be hard to change their customs when implementing e-invoice. By the way, I think that many overseas businesses started contacting you. What do they like to know from you, mainly?

 (HK) Most of overseas businesses seems to be only interested in the fact that Japan is trying to make its own country specification based on PINT. They intend to clarify the differences between Japan country specification and the Peppol specifications. However, in my opinion, the difference itself doesn’t matter. What they should understand is the reason and background of such differences. By knowing it, I am sure that overseas companies would have better understandings of Japan country specification as well as the goal of the Japan E-Invoice project. Of course, without such deep understandings, an overseas business can operate as a certified service provider in Japan. However, Japanese users would not be satisfied only with the service of e-invoice exchange offered by overseas companies. What Japanese market expects is a service with new value which we have never imagined. 

 (AS) Well, I understand it is difficult for overseas companies to enter the Japanese market with only a basic service, because Japanese service providers already offer it. In that sense, we, as QMS international, are offering new features enabled by Blockchain technology. We would like to highlight more about it, not only limiting to e-invoicing but also giving other use cases in Europe.