Income Tax Blue Return System: Benefits and the Application DeadlineWhat is good about the "blue return" for people who run a shop or work for themselves?
The blue return is a system under which people who keep books to a certain standard and file correctly receive favorable treatment. It covers people with real estate, business or forestry income. Benefits include the blue return special deduction of up to JPY 650,000, and in principle you must submit an Application for Approval to File a Blue Return by March 15 of that year to be approved.
- In principleBy March 15 of the year you want approval
- New business (on or after January 16)Within 2 months of the day you started business
- Taking over through inheritance (deceased filed white, on or after January 16)Within 2 months of the day you took over the business
- If you stopSubmit a notification by the filing deadline for the year you stop
Key points
- Special deduction: up to JPY 550,000 with double-entry bookkeeping, a balance sheet and income statement attached, and a return filed on time. Up to JPY 650,000 with electronic book retention or e-Tax electronic filing. Otherwise up to JPY 100,000
- For the JPY 650,000 deduction for 2022 (Reiwa 4) and later, you must meet the requirements for excellent electronic books and submit a notification (not required for those already receiving it, except in certain cases)
- Other benefits include salaries for blue return family employees, an allowance for bad debts (up to 5.5% of year-end receivables, 3.3% for financial businesses), and a 3-year carryforward of net losses
- Books are kept in principle for 7 years, and invoices and delivery slips for 5 years
- Application deadline: in principle March 15. For a new business started on or after January 16, within 2 months of the business start date
What to do in practice
- If you are starting a new business, submit the Application for Approval to File a Blue Return to the tax office for your place of tax payment within 2 months of the business start date
- If you aim for the JPY 650,000 deduction, prepare electronic book retention or e-Tax by the middle of the year
People who open their own shop or work for themselves report their earnings to the government once a year. If you choose the "blue return," where you keep careful records and report, the amount subtracted when calculating tax gets bigger. To use it, you must submit a notification first.
- 1. Start workStart your shop or work
- 2. Submit the notificationSubmit the "Application for Approval to File a Blue Return" to the tax office
- 3. Keep recordsRecord daily income and payments in your books
- 4. ReportFile your return once a year by the deadline
Points
- If you keep careful books, you can subtract up to JPY 650,000
- To use it, you submit a notification called the "Application for Approval to File a Blue Return"
- If you start a new business, a good guide is within 2 months of starting
What the words mean
- Blue return
- A way of reporting where you keep careful records and in return get special benefits
- Deduction
- Having a set amount subtracted when calculating
- National Tax Agency (NTA): NTA: No.2070 Blue Return System
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.