Blue-Form Tax Return Approval in Japan: Deadlines and Key Benefits

To file blue-form tax returns (青色申告), a company submits an application for approval of blue-form tax returns to the tax office for its place of tax payment and obtains approval. For a new company, the deadline is the day before the earlier of the day on which three months have passed since the date of incorporation and the last day of its first fiscal year. For an existing company, the deadline is the day before the start of the fiscal year for which it wishes to file blue-form returns.

Blue-form vs white-form returns

The blue-form return system grants tax benefits to companies that keep specified books, record their transactions and file returns based on those books. Returns filed by companies without approval are called white-form returns.

Newly incorporated companies tend to incur costs before sales come in, and so are likely to make a loss. Whether that loss can be offset against future profits is the most important difference.

Deadline for the application for approval

Examples of deadlines for new companies

• Incorporated on 1 April, March year-end: The day on which three months have passed (1 July) comes first, so the deadline is 30 June.
• Incorporated on 10 January, March year-end: The end of the first fiscal year (31 March) comes first, so the deadline is 30 March.

Setting the year-end close to the month of incorporation shortens the first fiscal year and brings the deadline forward. Once registration is complete, the safe approach is to file the application together with the notification of corporate establishment. Deadlines for other filings are summarized in Filings and deadlines after incorporation.

What to include and how to file

In addition to the company name, place of tax payment, representative and the fiscal year for which blue-form returns are to be filed, the application includes the following as reference information.

• The bookkeeping set-up (names and format of the books used, and when entries are made)
• Whether any special bookkeeping method is used
• Where a certified tax accountant (税理士) is involved, the extent of that involvement

The application can be filed on paper or through e-Tax. If you keep the books with accounting software, state this as the format of the books.

Deemed approval

If you apply on time, approval is deemed to have been granted if no decision to approve or reject has been made by a certain date, even without notice from the tax office. Applications are rejected in cases such as problems with keeping or recording the books.

If you miss the deadline

If you miss the deadline, the return for that fiscal year is a white-form return. Even so, if you apply by the day before the start of the next fiscal year, you can file blue-form returns from the following year. For a company with a March year-end, for example, file by 31 March, the day before the next fiscal year starts on 1 April. If you miss the first fiscal year, prepare the application for the following year straight away.

Decisions to make before incorporation

• Year-end month: affects the application deadline and the length of the first fiscal year.
• Bookkeeping method: which accounting software to use and who will keep the books.
• Involvement of a certified tax accountant: this is also stated in the reference information on the application.

Main benefits of blue-form returns

10-year loss carryforward

Losses incurred in a fiscal year for which a blue-form return was filed can be carried forward for 10 years and deducted from future income. For losses in fiscal years beginning before 1 April 2018, the period is nine years. To use the carryforward, the company must file a blue-form return for the year in which the loss arose and continue to file final returns in every subsequent year.

The deductible amount is capped at the full amount of income for small and medium-sized corporations, and at 50% of income for other companies.

For example, suppose a small or medium-sized corporation makes a loss of ¥8 million in its first fiscal year and income of ¥5 million in its second. In the second year, the loss carried forward reduces income to zero, and the remaining ¥3 million can be carried forward to the third year and beyond. Without blue-form approval in the first year, corporation tax would be charged on the ¥5 million of income in the second year.

Loss carryback refund

Small and medium-sized enterprises can carry a loss back to a fiscal year that began within one year before the loss year and claim a refund of corporation tax paid. The requirements are that the company has filed blue-form returns continuously since the previous year, and that it files the return for the loss year on time together with the refund claim.

Special rule for low-value depreciable assets and similar

Small and medium-sized enterprises can expense in full, in the year of acquisition, depreciable assets whose acquisition cost is below a certain amount. Under the FY2026 tax reform, the threshold for assets acquired on or after 1 April 2026 was raised from less than ¥300,000 to less than ¥400,000, and the rule was extended to cover assets acquired up to 31 March 2029. The total is capped at ¥3 million a year. The employee-number criterion for eligible companies has also been revised, so check the requirements in the National Tax Agency’s (国税庁, NTA) guidance on the amendments before applying it. Many other special depreciation and tax credit measures also require blue-form returns.

Corrections based on examination of the books

As a rule, a correction to a blue-form return is made only where the books and records have been examined and an error has been found in that examination. The system respects the fact that the return is based on the books in tax procedures as well. The corollary is that the books must be kept in good order.

Points for foreign-owned subsidiaries

Whether a company is a small or medium-sized corporation or enterprise is not determined by its capital alone. Even with capital of ¥100 million or less, a company such as a wholly owned subsidiary of a large corporation with capital of ¥500 million or more does not qualify as a small or medium-sized corporation: its loss deduction is capped at 50%, and as a rule it cannot use the loss carryback refund. The benefits available therefore depend on the size of the parent company. The relationship between capital and tax is explained in How to set your capital and how it affects tax, visas and credibility.

Books and record retention after approval

A company filing blue-form returns keeps books such as a journal and a general ledger and records its transactions in accordance with double-entry bookkeeping principles. It also prepares an inventory list, a balance sheet and a profit and loss statement.

• As a rule, books and documents are retained for seven years.
• Books for fiscal years in which a loss arose must be retained for 10 years to use the loss carryforward.
• Electronic transaction data, such as invoices received by email or online, must be retained in electronic form.

Books can be kept on paper or, if the requirements of the Electronic Books Maintenance Act are met, retained as accounting software data.

When blue-form approval may be revoked

Even after approval has been granted, it may be revoked in cases such as the following.

• Books are not kept, recorded or retained as required by law
• The company does not follow the tax office’s instructions
• Transactions are concealed or falsified in the books
• Final returns are not filed on time for two consecutive fiscal years

If approval is revoked, returns for subsequent fiscal years are not treated as blue-form returns, and benefits such as the loss carryforward can no longer be used. Two consecutive late returns in particular expose the company to revocation, so managing filing deadlines is essential. Deadlines and extension procedures are explained in Corporation tax filing and payment deadlines, and extensions.

How individual blue-form returns differ

Sole proprietors and individuals with real property income in Japan can also use the blue-form return system. For individuals, the application deadline is, as a rule, 15 March of the year for which blue-form returns are to be filed, or within two months of starting the business if it was newly started on or after 16 January of that year. The deadlines work differently from those for companies, so take care not to confuse the two.

How TIMOA can help

The application for blue-form approval is a simple form, but missing the deadline means first-year losses cannot be carried forward. It is important to file it together with the notification of corporate establishment immediately after registering the incorporation. After approval, keeping proper books and filing on time preserves the benefits.

Together with partner certified tax accountants, TIMOA provides consistent support from tax filings immediately after incorporation and setting up bookkeeping through to year-end closing and tax returns. For details of the service, see our Accounting, Tax & HR page.