Newsletter #008 Starting and Running a Business in Japan – Part 4 Why Should You Choose the Blue Return?

Helping foreign business owners understand Japan's tax system—one topic at a time.

In our last newsletter, we talked about the first steps when starting a business as a sole proprietor.

One important question is:　Should I choose the Blue Return?

For many business owners, the answer is yes.　But why?

What Is the Blue Return?

The Blue Return is a Japanese tax system that gives certain tax benefits to business owners who keep proper accounting records and meet the required conditions.

It is not a different type of tax.

It is a way of preparing and filing your income tax return with certain advantages.

What Are the Main Benefits?

There are several important benefits.

1. Blue Return Special Deduction

You may be able to deduct up to ¥650,000 from your business income if you meet the required conditions.

For example, proper bookkeeping is required, and the ¥650,000 deduction generally requires filing by e-Tax or meeting the requirements for qualified electronic bookkeeping.

There are also ¥550,000 and ¥100,000 levels, depending on the bookkeeping and other requirements. (国税庁)

2. Business Losses May Be Carried Forward

If your business has a loss, the loss may generally be carried forward and used against business income in the following years.

This can be especially useful when a new business needs time to become profitable. (国税庁)

3. Certain Family Salaries May Be Deductible

If a family member works regularly in your business, a salary paid to that person may be deductible as a business expense if the required conditions and procedures are satisfied.

This is called the Blue Return Family Employee Salary system.

There are specific rules, so it is important to check them before making the payment. (国税庁)

Is It Difficult?

The Blue Return requires proper bookkeeping and record keeping.

However, you do not necessarily need to do complicated accounting by yourself.

You can use accounting software or ask a tax accountant for help.

The important point is to set up your bookkeeping correctly from the beginning.

Key Takeaway

The Blue Return is not simply about getting a tax deduction.

It encourages you to keep proper accounting records and gives you several tax benefits when you meet the requirements.

If you are starting a business in Japan, it is better to think about the Blue Return at the beginning of your business, not after your first tax return.

Coming Next

Starting and Running a Business in Japan – Part 5

What Does “Good Bookkeeping” Mean?

Next time, we will look at one of the most important parts of the Blue Return:

keeping proper accounting records.

Prepared by　Kyoji Yasui Tax Accountant Office

Helping foreign business owners understand Japan's tax system with clear, practical guidance.