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JA 
For those who have just started their own business, the difference between "blue tax return" and "white tax return" is a point of great concern. Depending on which you choose, the tax savings and the effort required for filing documents will change significantly.
In this article, we will clearly explain the differences between blue and white tax returns, their advantages and disadvantages, as well as how to fill out the necessary notifications for blue tax returns and points to note, using actual experiences.
The basic differences between blue and white tax returns
| Comparison items | Blue tax return | White tax return |
|---|---|---|
| Efforts to submit | A little much | few |
| Accounting | Double-entry or simple bookkeeping required | Simple recording is OK |
| Deduction | Special deduction of up to 650,000 yen available | No deductions |
| Deficit carryover | Up to 3 years possible | No |
| Family salary | Can be recorded as an expense (salary of a full-time employee) | Limited |
| Documents to be submitted | A prior "Blue Return Approval Application Form" is required | Not required |
Main benefits of filing blue return
1. A special deduction of up to 650,000 yen is available.
If you keep your books using double-entry bookkeeping and file your tax return within the deadline, you can deduct up to 650,000 yen from your income (this can be easily achieved by using accounting software).
2. Deficits can be carried forward
Losses from a year in which the business is in the red can be carried forward and offset for up to three years from the following year. This is a reassuring system for those in their first year of business.
3. Full-time employee salaries can be expensed
If your spouse or family members help you with your business, you can claim the amount as an expense if you pay them a legitimate salary.
Characteristics and points to note about white tax returns
✅ Advantages of filing a white return
- Bookkeeping is simple and no complicated bookkeeping knowledge is required
- Can be used immediately after opening (no notification required)
Disadvantages of white tax return
- Special exemptions are not available
- No carryover of losses
- Family wages are limited
💡Points
In the past, it was quite easy to file a white return, but nowEven white companies are required to keep recordsTherefore, the advantage of "white is easy" is fading.
Who should choose the blue tax return option?
- Have a decent annual income,People who want to save on taxes
- Able to use accounting software to manage accounts
- People who have family members involved in the business
- Those who plan to continue their business in the future
💡A word of advice: Even if it is a side job, if your profits exceed 200,000 yen, you should consider filing a blue return.
How to file a blue return (Documents and procedures)
🔶Documents required:
- Blue return approval application form
- (If not open)Notification of opening and closing of a personal business
🔶Submission Deadline:
- Within 2 months of opening
- or By March 15 of that year
🔶Submit to:
- Tax office in your jurisdiction (or by mail)Application procedure for approval of blue return of income tax
📝Points to remember:
- Type of income: Business income
- Bookkeeping method: Double-entry bookkeeping (if you use accounting software, click here)
- How to submit: Handwritten submission is OK. Can be automatically created by freee or Money Forward
Important points regarding blue return filing (books, filing deadlines, etc.)
- Pay attention to the accounting format! If you use simple bookkeeping, the deduction will be reduced to 100,000 yen. If you want to aim for the 650,000 yen deduction, you will need "double-entry bookkeeping" + "e-Tax or electronic bookkeeping."
- Obligation to keep records In principle, you must keep your books and receipts for seven years. You can also store them on the cloud.
- Be sure to meet the submission deadline If you miss the deadline by even one day, you will not be able to receive the blue return benefits.
Summary: Choose the filing method that's right for you
| situation | Recommended reporting method |
|---|---|
| I want to save on taxes. Sales have increased. | Blue tax return (double-entry bookkeeping) |
| I just want to get started, but my sales are low | White tax return (first year only) |
| It's a side job, but I make more than 200,000 yen a year | Be aware of tax savings with blue tax returns |
Filing blue tax returns may seem a bit troublesome at first, but it can be made easier by using cloud accounting software and linking your credit card and bank account. In the long run, the difference in tax burden is large and there are many benefits. When you start your business, you should file blue tax returns.