Blue return is the most basic thing you have to know

  • What is blue return?

It is not easy for non-accounting person to record financial transactions correctly. Double-entry bookkeeping may be a hard part of the accounting rules. But this is a common accounting system around the world and almost all corporations (at least in Japan) use it as more reliable system than single-entry bookkeeping. And because the corporations, using the blue return system and keeping accounting records (e.g. a journal and a general ledger) and financial statements (e.g. balance sheet and income statement) properly, are said to be able to file their tax return correctly, the Japan tax office gives several benefits to the corporations.

Note: the opposite of blue return is called ‘white return (no benefits that blue return has)’. Also, it is not very important to know why we say ‘blue’ return, but some say that blue is the colour of sky, which might mean blue is a clear or transparent colour. So blue return corporations may file a tax return in a correct way. Don’t say you have the same reaction to white!

  • What are the benefits?

Carried-forward and carried-back net losses

If your corporation has a net loss (expenses exceed revenues), the net loss can be carried forward to the next ten years or be carried back to the preceding year in which there was a net income.

‘JPY 300,000 depreciation rules’ for small and medium-sized enterprises

If your corporation purchases depreciable assets costing less than JPY 300,000, these can be depreciated immediately in the year they were purchased.

Special depreciation rules and tax credits

Certain assets (e.g. machinery, software, vehicles) may apply to special depreciation rules (depreciated faster) or tax credits.