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Japan's Blue Return deduction changes in 2027: the new ¥750,000 tier
If you run a business in Japan as a sole proprietor or freelancer, the Blue Return special deduction (aoiro shinkoku tokubetsu kōjo) is one of the simplest ways to lower your income tax. The FY2026 tax reform changes this deduction starting with income for 2027 (Reiwa 9). This guide compares the current rules with the new ones and lists what to prepare this year.
What is the Blue Return?
The Blue Return is a filing status for people who keep proper books. It is available if you have business income, real estate income or forestry income. To use it, you file an application for Blue Return approval (aoiro shinkoku shōnin shinseisho) with your tax office.
- Usual deadline: March 15 of the year you want to start using it
- If you start a business on or after January 16: within two months of starting
Besides the special deduction, Blue Return filers can deduct salaries paid to family members who work in the business, and carry a net loss forward for three years.
Deduction amounts through 2026
| Deduction | Main requirements |
|---|---|
| ¥650,000 | Double-entry bookkeeping, balance sheet and profit and loss statement attached, filed on time, and either filed through e-Tax or books kept as “superior electronic books” |
| ¥550,000 | Double-entry bookkeeping, financial statements attached, filed on time (paper filing allowed) |
| ¥100,000 | Simple (single-entry) bookkeeping |
Deduction amounts from 2027
According to the National Tax Agency (NTA), the new amounts also depend on whether your revenue two years earlier was over ¥10 million.
| Bookkeeping and filing | Revenue two years earlier ≤ ¥10M | Revenue two years earlier > ¥10M |
|---|---|---|
| Simple bookkeeping | ¥100,000 | ¥0 |
| Double-entry + e-Tax | ¥650,000 | ¥650,000 |
| Above + superior electronic books | ¥750,000 | ¥750,000 |
- A new ¥750,000 tier. On top of double-entry books and e-Tax, your books must meet the “superior electronic books” rules, such as automatic links to invoice data and a record of every correction or deletion.
- e-Tax becomes mandatory for ¥650,000. Paper filing no longer qualifies for the ¥650,000 or ¥750,000 deduction.
- Large simple-bookkeeping businesses lose the deduction. If your revenue two years earlier was over ¥10 million and you use simple bookkeeping, the ¥100,000 deduction no longer applies.
How much does it matter?
Each extra ¥100,000 of deduction lowers your taxable income by ¥100,000. At a 10% income tax rate plus roughly 10% resident tax, that saves around ¥20,000. The gap between the ¥650,000 and ¥100,000 deductions is ¥550,000, which is roughly ¥110,000 in tax under the same assumptions. These are rough figures that ignore the reconstruction surtax and other deductions.
What to do this year
- Switch to double-entry bookkeeping. Accounting software creates the journal and general ledger for you from each transaction.
- Get ready for e-Tax. With a My Number Card and a smartphone, you can file online from the NTA's tax return preparation site.
- If you want ¥750,000, choose software that meets the superior electronic books rules. JIIMA certification is a useful sign.
- Start compliant books from January 1, 2027. The deduction applies to a full year of books, so switching at the start of the year is safest.
Summary
- Through 2026: ¥650,000, ¥550,000 or ¥100,000, as before.
- From 2027: ¥750,000 (superior electronic books), ¥650,000 (e-Tax required) or ¥100,000 (simple bookkeeping; ¥0 above ¥10M revenue).
- The best preparation is to start double-entry books in software and file through e-Tax.