Japanese tax laws require businesses to keep their accounting documents for the following number of years. These are the documents that you will need if you are ever audited by tax officials.

Category	Items	Retention Period  for Corporations	Retention Period  for Sole Proprietors
Accounting Ledgers N.B. For blue filers, ledgers must double entry.	Journal entries/ Accounting ledgers, Fixed assets ledgers/	7	7
Documents: Closing (of account) documents	Balance sheets/ Profit & loss statements Inventory lists	7	7
Documents: records of cash transactions	Bank books/ receipts/ Duplicate checks etc.	7	7
Documents: others	Invoices/ Quotations/ Delivery slips	7	5

In any year in which  the losses for that year exceed the profits (i.e. in the red), the documents in the chart  above for that year only must be retained for  10 years instead of 7 years. This means that if the profits are greater than the losses in the subsequent year, then the retention period for that year (i.e, the one where the profits are greater than the losses) will be 7 years.

So, with respect to documents for 2023, you usually have to  retain them for 7 years, but if you cannot make a profit in 2023, you will need to retains 2023’s documents for 10 years.

Since all of these documents were in paper form, businesses had to spend a lot of money for storage space and other related costs to comply with the retention requirements above.

To address the problem, the government enacted a new law, known as ERRL：Electronic Record Retention Law in July 1998.

Because the ERRL and related implementing rules were very strict and cumbersome, the new  regulations relaxed requirements to make it easier for us to keep the following documents in data format instead of printed paper.

Type	Subject to	Style of retained data format	Requirements
Documents you prepare	The* business which choose a data format	Electronic data	Need to introduce a measure to avoid cheating **Data needs search function with dates, amounts, and　counterpartiesNeed to equip a display and a printer when auditing
Documents you send /receive in paper format	The same as above	Scanned data	The following simplified regulations will be applied from 2024. Need to introduce a measure to avoid cheating **Data needs search function by date, amounts, counterpartiesNeed to associate the scanned data to accounting dataNeed to equip a display and a printer when auditing
Documents you send / receive in data format	All businesses except the businesses whose sales volume is less than 50M yen***	Electronic data	Need to introduce a measure to avoid cheating **Data needs search function with date, amounts, counterpartiesNeed to equip a display and a printer when auditing

*Please note that a business can choose whether to keep in paper or in digital format.

**Attaching a time stamp to the data, using a system to retain data which preserve any data history etc.　Setting a company rule which avoids cheating can be alternative.

***Exempt business still needs to retain the documents in data format but not to be obliged to follow the requirements.