Sole proprietors and freelancers have two options for their tax return: the "blue-form return" and the "white-form return." To put the conclusion first, if you have business income, the blue-form return is overwhelmingly more advantageous. On top of a special deduction of up to ¥650,000, it lines up perks the white-form return does not have — carrying losses forward, treating salaries paid to family as expenses, and more. On the other hand, the blue-form return has two conditions: advance application and double-entry bookkeeping. This article organizes the specific requirements for taking the ¥650,000 deduction, the differences from the white-form return, and the application deadlines, together with estimates of the tax savings.
What is the difference between the blue-form and white-form returns?
| Item | Blue-form return | White-form return |
|---|---|---|
| Special deduction | Up to ¥650,000 | None |
| Bookkeeping | Double-entry bookkeeping (¥100,000 deduction allows simplified bookkeeping) | Single-entry (simplified) bookkeeping |
| Obligation to keep books | Yes | Yes (since 2014 the white-form return is also obligated) |
| Carrying forward losses (net losses) | Carry forward for 3 years + carry-back refund also possible | In principle not possible |
| Salaries paid to family | With a notification, the full (reasonable) amount can be expensed | Cap of ¥860,000 for a spouse and ¥500,000 for others |
| Assets under ¥300,000 | Fully expensed at the time of acquisition (up to ¥3 million a year; deadline applies) | In principle up to under ¥100,000 |
| Advance application | Required (blue-form return approval application) | Not required |
The idea that "the white-form return is easy because it needs no books" is mistaken today — even with the white-form return, keeping records and retaining books are obligations. If the effort does not change much, there is little reason not to choose the blue-form return with its many perks.
The three tiers of the blue-form special deduction (¥650,000 / ¥550,000 / ¥100,000)[National Tax Agency No.2072]
Double-entry bookkeeping + (e-Tax electronic filing OR high-quality electronic book preservation)
In addition to the ¥550,000 requirements below, either file electronically via e-Tax by the deadline, or carry out electronic book preservation that meets certain requirements.
Double-entry bookkeeping + submitting the balance sheet and profit-and-loss statement by the deadline
You have business income (or real estate income at a business scale) and keep records with formal bookkeeping. Attach the financial statements and submit by the statutory filing deadline.
Simplified bookkeeping
A blue-form filer who does not meet the ¥550,000 / ¥650,000 requirements. Simple records such as a cash book are enough.
The level of bookkeeping (double-entry) is the same for ¥650,000 and ¥550,000. The only difference is whether you do electronic filing via e-Tax or high-quality electronic book preservation. With cloud accounting + e-Tax, you can add the extra ¥100,000 (the difference in the deduction amount) with almost no extra effort.
Tax-saving effect (guide for the ¥650,000 deduction)
Because the blue-form special deduction directly compresses your income, it works on both income tax and residence tax. Since the residence tax rate is 10%, a ¥650,000 deduction lightens the residence tax alone by ¥65,000.
| Income tax rate | Income tax reduction | Residence tax reduction | Total (guide) |
|---|---|---|---|
| 5% | ¥32,500 | ¥65,000 | About ¥97,500 |
| 10% | ¥65,000 | ¥65,000 | About ¥130,000 |
| 20% | ¥130,000 | ¥65,000 | About ¥195,000 |
| 23% | ¥149,500 | ¥65,000 | About ¥214,500 |
Furthermore, because National Health Insurance premiums are also linked to income, in some cases the actual reduction in your burden is a little larger.
The three big perks of the blue-form return that the white-form return lacks
You can carry a loss forward for 3 years
You can deduct a net loss from profitable income over the following 3 years. If the previous year was also a blue-form return, you can instead choose to carry it back to the previous year and receive a refund. Don't let early-startup losses go to waste.
Immediately expense items under ¥300,000
Under the special provision for small-sum depreciable assets, equipment and the like under ¥300,000 can be fully expensed in the year of acquisition (up to ¥3 million a year in total). Since this is a time-limited measure, check the latest applicable deadline.
Turn salaries to family into expenses
By filing a notification for salaries to a blue-form dedicated family employee, you can fully expense a reasonable salary paid to a family member who shares your household (the white-form cap is ¥860,000 for a spouse and ¥500,000 for others)[National Tax Agency No.2075].
Example of carrying a loss forward / carrying it back
Taxable income in year 2 = ¥1,500,000 − ¥1,000,000 = ¥500,000 (with the white-form return, ¥1,500,000 would be taxed).
Application procedure and deadlines
1. Submit the blue-form return approval application to the tax office (advance application)
- New business start: within 2 months of the start date (blue-form from that year)
- Already running a business: by March 15 of the year you want to go blue (e.g., to be blue-form from the 2026 tax year, by March 15, 2026)
Legal basis: National Tax Agency No.2070 The blue-form return system (in Japanese)
2. Keep records with double-entry bookkeeping: With cloud accounting such as freee, Money Forward, or Yayoi, you can produce double-entry books and financial statements even without bookkeeping knowledge.
3. File electronically via e-Tax: Filing via e-Tax with a My Number card or the like makes it the ¥650,000 deduction.
The blue-form return approval application must be submitted beforehand. Even if you submit the application on the tax-return deadline (March 15), it will not be in time for that year and you will be white-form. Once you decide, submit it early.
FAQ
What is the difference between ¥650,000 and ¥550,000?
The bookkeeping (double-entry) is the same; the difference is whether you do electronic filing via e-Tax or high-quality electronic book preservation. If you file electronically, it becomes ¥650,000.
Can I file a blue-form return for a side job (miscellaneous income)?
The blue-form return applies to business income, real estate income at a business scale, and timber income. It cannot be applied to miscellaneous income related to a line of work. For income to be recognized as business income, preparing and keeping books is a prerequisite.
Does the white-form return need no books?
No. Since 2014, even with the white-form return, keeping records and retaining books and the like are obligations. Since the effort does not change much, the blue-form return with its perks is more advantageous.
Can I still switch to the blue-form return now?
If you submit the approval application by March 15 of the year you want to go blue (within 2 months of the start for a new business), you can file the blue-form return from that tax year.
Summary
Reference links (sources)
This article is based on the following National Tax Agency published materials (neutral, primary sources). Because the applicable requirements and the deadlines for special provisions are amended, please check the latest content before filing.
- National Tax Agency No.2070 The blue-form return system (in Japanese)
- National Tax Agency No.2072 The blue-form special deduction (in Japanese)
- National Tax Agency No.2075 Salaries to blue-form dedicated family employees and the dedicated family employee deduction (in Japanese)
- National Tax Agency — On record-keeping and retention of books for individuals running a business (in Japanese)
* This article is general information, not tax advice. For judgments on bookkeeping methods and deduction requirements, please consult a tax office or a tax accountant.