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 non-Japanese business owners who may find it difficult to handle Japanese tax matters, especially when language is a barrier. If you find the Japanese tax system confusing, I can help you manage your tax filings smoothly.
If you are unsure about the Blue Form tax return system in Japan, this article will give you a clear overview.
What Is the Blue Form Tax Return?
Both individuals and companies operating a business in Japan can choose to file taxes under the Blue Form (Aoiro Shinkoku) system.
This system offers several tax advantages, but it also requires proper bookkeeping, including double-entry accounting and the preparation of financial statements.
Meeting the application and filing deadlines is essential to benefit from this system.
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.
Reduced Risk of Estimated Taxation
If you do not use the Blue Form system, the tax office may estimate your income based on industry averages or other available data.
Using the Blue Form helps reduce this risk by maintaining proper records.
Immediate Expensing of Small Assets
For businesses with capital of less than JPY 100 million, assets costing less than JPY 300,000 can be fully expensed in the year of purchase.
Normally, assets over JPY 100,000 must be depreciated over several years, so this rule provides a clear tax advantage.
Special Deduction of Up to JPY 650,000 (Individuals)
Individuals can claim a deduction of up to JPY 650,000 from taxable income.
To qualify for the full deduction:
- Proper double-entry bookkeeping is required
- Financial statements must be prepared and submitted
Although this requires additional work, the tax savings are often significant.
Salary Payments to Family Members (Individuals)
Under certain conditions, salaries paid to family members can be treated as deductible expenses.
Important Deadlines
For Individual Business Owners
You must submit the Blue Form application by March 15 of the same tax year.
If you start a new business, the application must be submitted within two months of starting the business.
For Corporations
The application must be submitted within the relevant fiscal year.
If you establish a new company, the deadline is within three months of incorporation.
Related Article
If you are interested in tax-saving strategies in Japan, you may also find this helpful:
Effective Ways to Save Taxes When Running a Business in Japan
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