When will advance application become unnecessary under the revised Electronic Bookkeeping Act? Explanation of revised points and preservation requirements

The Electronic Bookkeeping Act is a law that establishes rules for saving books and other documents as data . It was revised in 2021, and the revised version has come into effect from January 1, 2022.

However, the mandatory storage of data is scheduled to be introduced in stages in the future. Therefore, some people may be worried about not knowing when advance application will no longer be necessary.

In this article, we will explain when the electronic book storage system was revised so that advance application is no longer necessary, and how it was revised.

1. When does advance application become unnecessary for the revised electronic ledger storage?

Due to the revision of electronic ledger storage, advance application is no longer required for scanner storage after January 1, 2022 .

Until then, it was necessary to submit a notification to the director of the tax office and obtain approval. However, due to the revision of the Electronic Bookkeeping Act, the application procedure will no longer be necessary after January 1, 2022.

Data storage is now easy to incorporate, so you can start saving with a scanner or electronic data as soon as you are ready. It can be said that the new system has made many companies’ accounting operations more efficient and more flexible.

2. Six amendments to the Electronic Bookkeeping Act that came into effect from January 2022

We will explain the amendments to the Electronic Bookkeeping Act that came into effect in January 2022.

1. Timestamp requirements for electronic transactions are relaxed
2. Relaxation of electronic transaction and bookkeeping search requirements
3. Electronic data storage of electronic transactions becomes mandatory
4. Book correction/deletion history will be abolished
5. Paper storage of electronic transactions will be abolished
6. Penalties for fraud will be strengthened

2-1. Time stamp requirements for electronic transactions will be relaxed

Amendments to the Electronic Bookkeeping Act will ease timestamp requirements to prove that data in electronic transactions has not been tampered with .

Previously, when saving national tax documents in a scanner, the recipient’s signature and a timestamp within three business days were required. However, after the revision of the Electronic Bookkeeping Act, the period for time stamping has been extended to a maximum of two months, and signatures are no longer required.

Additionally, when using a system that stores the history of data deletions and modifications, there is no need to add timestamps. Complicated procedures will be simplified, and you will be able to carry out your work more efficiently.

2-2. Requirements for searching electronic transactions and ledgers will be relaxed.

Due to the revision of the Electronic Bookkeeping Act, the search requirements for national tax documents have changed . Previously, search requirements had to be set using multiple conditions, but after the revision, search requirements can be narrowed down to three items: transaction date, transaction amount, and business partner.

Additionally, when responding to download requests from tax officials, it is no longer necessary to specify ranges or combine items as in the past. It is expected to improve the efficiency of accounting operations by reducing complicated procedures.

2-3. Electronic data storage of electronic transactions will be mandatory

The revised Electronic Ledger Preservation Act has also changed the method of storing electronic data related to electronic transactions. Previously, it was permissible to print and save in paper format, but the new system requires saving in data format.

In particular, documents related to electronic transactions, such as EDI, cloud server, and PDF data invoices, must be stored as electronic data. However, please be aware that there are storage requirements that must be met when saving electronic data. Specific storage requirements will be explained later.

Storing data improves the reliability of transactions, enabling efficient accounting operations. Let’s move forward with the transition to new preservation methods while keeping in mind the key points of the law revision.

2-4. Book correction/deletion history will be abolished

An important point in the revision of the Electronic Bookkeeping Act is that the history of changes and deletions in books will be abolished . Previously, when making corrections or deletions to the contents of a ledger, it was necessary to add a reversal journal entry to clearly state the details of the correction or deletion.

However, with the new revision, it is possible to save just by adding a timestamp, so there is no need to specify the changes or deletions. As a result, complicated procedures will be simplified and you can expect efficient accounting operations.

In the future, ensuring accurate bookkeeping and record-keeping will be the key to smooth business operations. It is important to fully understand the key points of legal revisions and take appropriate measures.

2-5. Document storage of electronic transactions will be abolished

Due to the revision of the Electronic Bookkeeping Preservation Act, electronic data transactions made after January 1, 2022 are required to be saved as data. In other words , from now on, it will no longer be possible to store documents in paper form, as was the case with electronic transactions in the past .

However, there will be an “excuse period” until December 31, 2023. During the indulgence period, it is possible to print out and save it in writing if it meets the specified requirements. Use this period to put in place an appropriate data management system.

For details and requirements regarding changes to electronic bookkeeping laws, please check the tax-related information released by the government to ensure smooth business operations.

2-6. Penalties for fraud will be strengthened

Although the introduction of electronic bookkeeping has become easier due to the relaxation of the requirements of the Electronic Bookkeeping Act, the penalties for fraudulent activities have become stricter. If it is discovered that electronic data has been tampered with, an additional 10% tax will be imposed in addition to the normal heavy tax.

Also, please note that if you fail to meet the obligations regarding data storage after the grace period, your blue return approval will be revoked. Obey laws and conduct accurate and transparent accounting operations.

3. Three ways to deal with the revision of the Electronic Bookkeeping Act

From here, we will introduce carefully selected ways to deal with the revision of the Electronic Bookkeeping Law. There are three specific solutions:

1. Understand your company’s electronic transaction status
2. Be clear about where your data is stored
3. Check approvals and work flow

3-1. Understand your company’s electronic transaction status

In order to take action to revise the Electronic Bookkeeping Act, it is important to first understand the status of your company’s document storage . Let’s understand the current situation by organizing the storage ratio and format of paper and data.

Also, be sure to check the details of each electronic transaction. Particular attention should be paid to the management of IC card payment data for advance expenses and transportation expenses.

By accurately understanding your company’s situation, you can build an appropriate data management system in preparation for the revision of the Electronic Bookkeeping Act. This will help improve the efficiency of accounting operations.

3-2. Clarify where to save data

Next, it is important to create a storage location where the saved electronic data can be easily referenced and printed when needed . Instead of storing data in different locations and methods in different departments, decide on a central location to organize your data.

It is also important to establish a regular backup system to prevent data corruption or loss. Data organization and backup are essential for accurate information management and smooth business operations. Develop guidelines within your organization and clarify standards for data management.

3-3. Check approval and work flow

In order to meet the necessary requirements and ensure data storage, it is essential to review approvals and work flows. Don’t just focus on data storage; also digitize approvals and business processes .

If merchants and business processes are not reviewed, it may become difficult to respond appropriately to the revised Electronic Bookkeeping Act. Digitalize your approvals and business processes to be ready to adapt to legal changes.

4. Four points to note regarding the electronic bookkeeping method

There are four specific points to keep in mind when implementing the Electronic Bookkeeping Act:

1. Check requirements for each storage method
2. Keep records for at least 7 years
3. Electronic storage will be mandatory from January 2024
4. Check the revision points according to the FY2020 Tax Reform Outline

4-1. Check the requirements for each storage method

There are two types of preservation requirements under the Electronic Bookkeeping Act: “ensuring authenticity” and “ensuring visibility.” We will explain the storage requirements that must be met for each of the three storage methods: electronic ledger storage, scanner storage, and electronic data storage.

4-1-1. Electronic ledger storage

In order to effectively digitize bookkeeping documents, it is important to ensure authenticity and visibility . Please make sure to meet the following two storage requirements.

The first requirement is to clearly maintain a history of modifications, deletions, and additions. Ensure that data changes are tracked by using timestamps and implementing a history management system. In addition, it is necessary to consider ease of search and create an environment where documents can be quickly searched by date, transaction amount, etc.

The second requirement is to provide documentation for the system. In particular, be sure to clearly explain how to operate the electronic contract system and accounting software so that bookkeeping and document management can be done smoothly. It is also important to install high-performance color printers and displays to ensure visibility and print quality.

4-1-2. Scanner storage

When saving documents with a scanner, be sure to ensure visibility . This is because if the text is blurred or the image size is too small, it will be difficult to read.

Use a high-quality scanner, digital camera, or smartphone to preserve clarity. It is recommended that the scanner has a resolution of 200 dpi or higher and can read each color of red, green, and blue with 256 or more gradations.

Also, timestamp your saved files to ensure authenticity. In order to save accurate data and retrieve information quickly, it is important to organize it so that it can be easily searched by date, transaction amount, etc.

4-1-3. Electronic data storage

When storing data electronically, particular attention must be paid to ensuring authenticity . Regarding visibility, there is no need to pay special attention to data transactions, as the contents have already been confirmed by each other. If you use email, etc., be sure to record the date and time when data is sent and received.

However, in order to increase data reliability and maintain accurate records, truthfulness measures are required. Add a timestamp to the electronic data to prove the date and time it was created and that it has not been tampered with.

4-2. Keep accounting records for at least 7 years

Although it varies depending on the type of document, accounting records are required to be kept for at least seven years. Taking this period into consideration, it is important to comprehensively consider the operational and budgetary aspects of your organization when storing electronic data .

Carefully plan for storing electronic data by considering the personnel and budget needed to store seven years’ worth of documents. The key to success is to compare multiple storage methods, select the appropriate method, and proceed with your accounting operations effectively.

4-3. Electronic storage will be mandatory from January 2024

Compliance with the mandatory electronic storage of electronic transactions will begin in January 2024. Starting from the 2025 tax return , you will need to electronically save the entire year.

Make effective use of the remaining period and take necessary measures. If you have any questions about implementing electronic storage, we recommend that you consider seeking professional advice.

4-4. Check the revision points according to the FY2020 tax reform outline

The “ Reiwa 5 Tax Reform Outline ” announced in December 2020 includes a permanent grace period for the mandatory electronic storage if certain conditions are met .

The following three items will be revised in the FY2020 Tax Reform Outline, and permanent grace measures have been included.

• Clarification of the scope of excellent electronic ledgers
• Relaxation of scanner storage requirements
• Review of storage requirements for electronic transactions

Due to these changes in requirements, electronic storage obligations will be suspended under the following conditions:

1. The director of the tax office recognizes that there is a reason why it cannot be stored in accordance with the storage requirements.
2. Electronic data of transaction information can be downloaded smoothly for tax audits.
3. Properly save output documents so that they can be presented immediately in the event of a tax audit

Please keep in mind that this is a grace period that will only be applied if the conditions are met.

5. Follow the procedures correctly based on the Electronic Bookkeeping Act

If you want to save electronic transaction data, it is important to follow the correct procedures based on the Electronic Bookkeeping Preservation Act . Observe the two types of preservation requirements: “ensuring authenticity” and “ensuring visibility,” and take appropriate measures for each preservation method.

In preparation for mandatory electronic storage from January 2024, please review the storage status of data and clarify the storage location. Let’s make appropriate preparations for the evolution of accounting operations and take solid steps towards the future.