Blue Form (Aoiro Shinkoku) in Japan: Benefits and Deadlines
【Koshida Accounting Firm Column Date:】
Blue Form (Aoiro Shinkoku) in Japan: Benefits and Deadlines
Blue Form Tax Return in Japan: Benefits and Key Requirements
Hi, my name is Taisei Koshida, and I am a certified public accountant and licensed tax accountant in Japan.
I support foreign business owners and foreign entrepreneurs with accounting and tax matters in Japan, especially when language is a barrier.
If you are unfamiliar with the Japanese tax system or the Blue Form (Aoiro Shinkoku), this article explains its main tax benefits, accounting requirements, and application deadlines.
For many individuals and companies starting a business in Japan, applying for the Blue Form is an important part of tax planning.
The most important point is the deadline. If you miss the application deadline, you generally cannot use the Blue Form for that year. For this reason, I recommend checking the deadline when you start a business or establish a company rather than waiting until it is time to prepare the first tax return.
What Is the Blue Form (Aoiro Shinkoku) in Japan?
Both individual business owners and corporations in Japan can apply to file tax returns under the Blue Form (Aoiro Shinkoku) system.
The Blue Form offers several tax advantages in exchange for maintaining proper accounting records and meeting certain requirements.
For individual business owners, proper bookkeeping is particularly important if you want to claim the larger Blue Form special deduction.
Meeting the application and tax filing deadlines is also essential to receive the available tax benefits.
For foreign entrepreneurs starting a business in Japan, understanding the Blue Form system early can help avoid missing important tax deadlines.
Key Benefits of the Blue Form Tax Return
Carryforward of Losses
You can offset past losses against future profits:
- Individuals: up to 3 years
- Corporations: up to 10 years
This is especially useful for startups, which often incur losses in the early stages.
Immediate Expensing of Small Assets
Eligible small and medium-sized businesses using the Blue Form may be able to immediately expense certain depreciable assets costing less than JPY 300,000 per asset, subject to applicable requirements and annual limits.
Normally, depreciable assets above certain thresholds must be depreciated over their useful lives.
This special rule can therefore provide a useful tax benefit for small businesses in Japan when purchasing equipment and other business assets.
Special Deduction of Up to JPY 650,000 for Individuals
Eligible individual Blue Form filers may claim a special deduction of up to JPY 650,000.
To qualify for the JPY 650,000 deduction, certain requirements must be met, including:
- Keeping books using double-entry bookkeeping
- Preparing and submitting the required financial statements
- Filing the tax return by the statutory deadline
- Filing electronically through e-Tax or meeting the requirements for qualified electronic bookkeeping
Depending on the bookkeeping and filing requirements met, a JPY 550,000 or JPY 100,000 deduction may apply instead.
Salaries Paid to Qualified Family Members
For individual business owners, the Blue Form system can also allow salaries paid to qualifying family members who work in the business to be deducted, subject to applicable requirements and procedures.
This treatment is subject to specific conditions, so the arrangement should be established properly rather than simply treating payments to family members as business expenses.
Stronger Support for Reported Income and Expenses
Another advantage of the Blue Form is that your taxable income is supported by proper accounting books and records.
If proper records are not maintained, the tax office may determine taxable income based on available information in certain circumstances.
Maintaining proper accounting records under the Blue Form system can therefore provide stronger support for the income and expenses reported in your Japanese tax return.
Important Blue Form Application Deadlines
For Individual Business Owners
You must generally submit the Blue Form application by March 15 of the same tax year.
If you start a new business on or after January 16, the application must generally be submitted within two months of starting the business.
For Corporations
A corporation that wants to use the Blue Form generally needs to submit the application by the day before the beginning of the fiscal year for which it wants to use the Blue Form.
For a newly established corporation, the deadline for the first fiscal year is generally the day before the earlier of:
- Three months after the date of incorporation; or
- The end of the first fiscal year.
A common mistake is to assume that every new company has three months to file the application. If the first fiscal year ends earlier, the deadline comes earlier as well.
This is particularly important for a company with a short first fiscal year.
If you are establishing a company in Japan, see Starting a Company in Japan: 3 Essential Tax Steps for Foreign Entrepreneurs.
For a broader overview of company setup, accounting, payroll, consumption tax, corporate tax, and ongoing tax compliance, see Starting & Running a Business in Japan: Tax and Accounting Guide for Foreign Business Owners.
Frequently Asked Questions
What Is the Blue Form (Aoiro Shinkoku) Tax Return?
The Blue Form (Aoiro Shinkoku) is a tax filing system available to both individual business owners and corporations in Japan. By submitting an application on time and maintaining proper accounting records, you can take advantage of various tax benefits.
Is Filing a Blue Form Tax Return Mandatory?
No.
The Blue Form system is optional. However, many business owners choose it because it provides valuable tax benefits that are not available under the standard White Form tax return system.
What Are the Main Benefits of the Blue Form Tax Return?
The Blue Form system offers several advantages, including:
- Carryforward of business losses
- Immediate expensing of certain small assets
- A special deduction of up to JPY 650,000 for eligible individual business owners
- Deductibility of salaries paid to qualified family members
- Stronger accounting support for reported income and expenses
When Is the Deadline to Apply for the Blue Form?
For individual business owners, the application must generally be submitted by March 15 of the relevant tax year. If you start a new business on or after January 16, you must generally apply within two months of the business start date.
For a newly established corporation, the application must generally be submitted by the day before the earlier of three months after the date of incorporation or the end of the first fiscal year.
Can I Apply for the Blue Form After the Deadline?
Generally, no.
If you miss the deadline, you will usually have to wait until the following tax year to use the Blue Form system.
Can Foreign Business Owners Apply for the Blue Form?
Yes.
Foreign nationals operating a qualifying business in Japan can also apply for the Blue Form if they meet the applicable requirements.
For many foreign entrepreneurs starting or running a business in Japan, the Blue Form is worth considering because of the tax benefits available under the system.
If you are unfamiliar with Japanese accounting or tax filing requirements, I recommend checking the application deadline and bookkeeping requirements early.
Accounting and Tax Support in Japan
My main areas of expertise are accounting and taxation.
I assist foreign individuals, entrepreneurs, and small businesses with bookkeeping, accounting in Japan, Japanese tax filings, corporate tax returns, consumption tax, and tax planning, with support available in English.
I do not try to handle every professional field myself. When necessary, I work with judicial scriveners for company registration, administrative scriveners for visa matters, social insurance specialists, and other professionals.
If you are starting or running a business in Japan and need assistance with the Blue Form, bookkeeping, accounting, or Japanese tax filings, please contact me through the inquiry form.