Are handwritten “ryoshusho” really necessary?

Zenya Ozawa | Certified public accountant, Tax accountant

The original Japanese article was published on 18:37 April 6, 2016

“May I have a ryoshusho?” *The meaning of the word “ryoshusho” is the same as “receipt” so we have kept it in the “Roma-ji”*

In Japan, the practice of receiving a handwritten ryoshusho instead of a mechanically printed receipt at a store is not uncommon.

A “ryoshusho” is a record to show the amount of money paid, the date, the item paid for, the name of the store, and a signature from the store confirming payment in writing. (Picture)

So why is a ryoshusho acceptable, but a receipt isn’t, in some cases?

In Japan, when employees receiving reimbursed expenses for work, most companies have a process that requires providing a ryoshusho to the accountant.

However, there are almost no cases where a receipt printed from a cash register would not be accepted as an expense.

Let’s take a look at the major issues surrounding this unique business practice and the misunderstandings and superstitions regarding receipts and handwritten ryoshushos in Japanese society.

Receipts aren’t the same as ryoshusho??

Many people in Japan seem to believe that “receipts are not official forms of ryoshusho.”

However, receipts printed out from cash registers are indeed considered official ryoshusho.

Take a look at a receipt that you may have on hand. Most receipts print titles that read, “ryoshusho.”

Also, some mass retailers even have a signboard that says, “Our store’s receipts can be used as official ryoshusho.” However, it does not mean that they have received any special permission from any authority such as a tax office to regard them as official ryoshusho. The reason why these stores put up this signboard is mainly because they want to avoid long lines at the cash registers with customers requesting handwritten ryoshushos.

Furthermore, the Japanese translation for ‘receipt’ is ‘ryoshusho,’ and the English translation for ‘ryoshusho’ is ‘receipt.’ In other words, ‘receipt’ equals (=) ‘ryoshusho.’

So, even if you attempt to request a ryoshusho instead of a receipt at hotels or restaurants overseas, both mean the same thing in English. That is why the front desk clerk or casher will not understand when you want a ryoshusho. “Excuse me? What you have in your hand is a receipt (ryoshusho), I believe…” is most likely what you’ll hear as their response.

Overseas, there is no business practice of issuing a handwritten ryoshusho instead of a receipt. Differentiating receipts and handwritten ryoshusho could be a custom that is unique to Japan.

Receipts won’t be accepted for expenses??

Sometimes, people believe that “only handwritten ryoshushos are accepted when submitting an expense report.” Ultimately, it is the tax office that determines what can be accepted as an expense. So, I went to the tax consultation office of the National Tax Agency to ask the following question.

“I forgot to get a handwritten ryoshusho. Would a receipt be accepted when submitted for an expense report?

The response from the consultant was, “Whether it is accepted as an expense or not is entirely dependent on the validity of the expenditures. The appearance or format of the record does not have any impact on it.”

Thinking that handwritten ryoshusho are the only format of records that are accepted for expenses is just a misunderstanding.

Also, in the case of major corporations, in addition to the tax offices that perform tax audits (Regional Taxation Bureaus), the presence of auditors who perform accounting audits for them is significant. In addition to tax offices, audit firms are ultimately responsible in terms of determining whether expenses are acceptable or not.

Just in case, I checked with a friend of mine who is a certified public accountant and has worked for a major audit firm for many years and received the following response.

“Determining what can be an expense and what cannot has nothing to do with the record format, receipt or handwritten ryoshusho. However, I think that handwritten ryoshushos are more suspicious than mechanical receipts.”

So what exactly does it mean when he says that ryoshushos are more suspicious?

The major problem with handwritten ryoshushos

From an accounting and compliance perspective, we can say that handwritten ryoshushos have some major potential problems.

First, from an accounting perspective, handwritten ryoshushos do not indicate the details of the payments, so sometimes they cannot be processed. It is because very often you cannot tell the details about the payment, whether the payment was for a computer, consumable goods, books, or stationary supplies, etc. just by looking at the ryoshusho.

Next, from a company’s compliance perspective, handwritten ryoshushos pose an even more serious potential problem.

With receipts, most people may believe that it is difficult to differentiate official payments from personal payments, but in actuality, it is much easier to hide personal payments in handwritten ryoshushos that will not be even discovered so easily.

For example, even if employees of a company receive a ryoshusho that includes payments for gifts for themselves at a restaurant used for entertaining clients, or personal shopping or meal payments at a hotel during a business trip, it is difficult to tell exactly what the money was spent on if the ryoshusho only says “meal fee” or “hotel expense” in the remarks column.

Besides, it is also possible to falsify figures on handwritten ryoshushos by adding an extra “0”, or changing a “3” into an “8,” for example.

That is why tax inspectors and accountants of audit firms keep their eyes more sharply on handwritten ryoshushos than receipts.

Why do Japanese companies request handwritten ryoshushos?

I’m sure there are people who work at companies who will tell you that, “unless you get a handwritten ryoshusho, the company won’t reimburse you any expenses.”

Whether the tax office or audit firm says it’s okay, it doesn’t mean anything as long as the company’s accounting department says it’s not. In Japan, there are still many companies that insist on receiving handwritten ryoshushos.

There are probably some reasons why companies stick to these types of rules. Here, I’ll pick up a few of those and verify whether they are reasonable or not.

Reason 1 - The impression people have of receipts

We often hear that, with receipts, it is difficult to differentiate official company expenses from the employee’s personal payments. On the other hand, handwritten ryoshushos include the name of the company, so they can clearly tell that the payment was made for a company expense.

Basically, “receipts look somewhat more private.”

The largest flaw with receipts is that there is no recipient company name included on them. In other words, receipts cannot prove exactly who made the payments.

However, we can say the same thing about handwritten ryoshushos. Store clerks normally do not check the IDs of the customers they are writing the ryoshusho for. They simply write down the recipient company name as the customer tells them. If they wish, even a 10-year old child could obtain a ryoshusho under the name, “XX Co., Ltd.”

Reason 2 - It is a relic of an old custom

Years ago, when cash registers did not have the great performance they have now, receipts did not print even the name of the store or of the items purchased, and receipts alone could not serve the functions that ryoshusho did. That may be where the custom of receiving handwritten ryoshushos as an official record of transactions began.

This traditional business practice of receiving handwritten ryoshushos has continued up to today, I guess.

However, nowadays, the technology of cash registers has become much more advanced. Most receipts print the store name, telephone number, and address on them, as well as other detailed information such as the items purchased and the quantity by linking to the POS data.

Except for the fact of not printing the recipient name, there’s no doubt that the amount of information listed on receipts is significantly more than on handwritten ryoshushos.

Reason 3 - Confusion during consumption tax revisions

This issue comes from when the consumption tax was revised in Japan over ten or so years ago. The law was revised to push companies and individual business owners to keep track of bills and ryoshushos that complied with the required descriptions, including recipient name, product names, and the amount paid.

The rumor quickly spread that you had to receive a ryoshusho that had your name as a recipient on it regardless of the amount of payment. This perhaps accounts for the fact that there are quite a few people who still believe that handwritten ryoshushos are absolutely necessary.

In fact, for making payments to businesses that deal with the general public (anonymous customers of which the number cannot be specified) such as retailers, restaurants, photographers, travel-related businesses, buses, taxis, and metered parking, recipient names are not required on ryoshushos when filing consumption taxes.

In other words, when making payments at a department store, electronics store, stationary shop, restaurant, or tavern, etc., there is absolutely no problem regardless of the amount of payment, as long as you obtain a receipt.

Furthermore, for consumption tax purposes, if the amount paid to any of the businesses mentioned above is under 30,000 yen, there is no need to attach a ryoshusho or receipt. Although it is obviously better to keep some sort of record that can prove that you paid a certain amount.

For filing income taxes and corporate taxes, there are no detailed stipulations regarding ryoshusho like there are for consumption taxes. Income taxes and corporate taxes simply take into account whether payments were made properly.

The bottom line is that there are no good reasons anymore for companies to urge their employees to get handwritten ryoshushos.

It’s about time we stopped requesting “ryoshushos”

Sometimes I see people buying food at supermarkets that is obviously personal shopping for themselves, but they receive ryoshushos under their company’s name. This may be the reality behind the idea that people could intentionally hide their personal expenditures by using ryoshushos.

If there’s nothing to hide, receipts that indicate the details of purchases will be a much better and preferable option.

Even if a receipt for food and beverages indicates that beer or Japanese sake was ordered, you don’t have to worry about whether they are approved as official expenses.

With our current corporate tax system, up to 5,000 yen per person can be considered an expense for social expenses, and 50% of any amount that exceeds 5,000 yen can also be accepted as an expense.

When receipts can fulfill the purpose, asking for a handwritten ryoshusho is simply a waste of natural resources, human energy, and time.

Besides, if a reduced tax rate is introduced in the future at the same time as a rise in consumption taxes, you will be required to write everything separately, such as “Consumption tax 8%: XXXX yen, Consumption tax 10%: XXXX yen…,” on handwritten ryoshushos.

If that ever happens, we do not want to imagine how much time and effort will need to be poured into issuing handwritten ryoshushos.

When waiting in line to pay at a store, the customer in front kept you waiting by requesting a handwritten ryoshusho…

I’m sure most Japanese people have had this kind of frustrating experience in the past. It is not too much to say that you are actually “stealing precious time” from people, living in this busy world, when you request an unnecessary handwritten ryoshusho.