Main points
- Blue tax return forms give preferential tax treatments for fillers;
- A registration in the local tax office is necessary;
- The company must undertake a specific accounting procedure to be eligible.
In Japan, Corporation tax is operated on the basis of a self-assessment system.
When a branch office is newly established in, a notification must be submitted to tax authorities. A notification must also be submitted when a foreign company generates income subject to corporate tax in Japan without establishing a branch office.
Please also note that the establishment of a branch may arise a registration fee payable to the local tax office.
Fiscal years in Japan generally start on April 1st and finish on March 30th of the next year. Tax is imposed on a current year basis and the taxable year of a company cannot exceed twelve months. However, periods less than 12 months are allowed. The tax year adopted is generally that specified in a company’s constituent documents, so it is possible for a company to adopt a calendar year. Japanese branches of foreign companies are required to adopt the accounting period used by their foreign head office.
Blue tax return forms
Tax return forms for companies come in two formats: white forms (standard procedure) and blue forms (simplified procedure). A company may file a blue form tax return with the approval (form/guide) from the tax office of its jurisdiction.
Companies filing blue form tax returns enjoy a variety of tax benefits, as well as procedural and administrative advantages. Blue form system is based upon a self-assessment principle and aiming to improve accurate tax returns. It also means that this privileged status can be revoked at any time if the company is not keeping its accounting books properly. In order to receive approval from the tax office to file a blue form tax return, a company must submit an application for approval prepared in the prescribed format no later than the day prior to the starting day of the taxable year. (form/guide)
Newly established subsidiary companies and foreign companies establishing new branch offices in Japan must submit the application (form/guide) for approval no later than the day prior to either the day marking three months since and including the date of the establishment of the company (or branch) or the last day of the company’s (or branch) initial taxable year after establishment, whichever comes first, if intending to file a blue form tax return from the taxable year in which the date of establishment occurs.
A preferential tax treatment is given to companies who file blue returns forms. If a company undertakes to maintain specified bookkeeping records, documentation and gains approval from the director of the local tax office, the company is therefore able to file a blue return. The bookkeeping includes regular bookkeeping that enables you to prepare a balance sheet and income statement at the end of the year. But simple booking such as using a cash book, accounts receivable ledger, accounts payable leger, expense ledger and fixed asset ledger is also permitted. They should be retained for seven years in principle. Bills, delivery notes etc. only need to be kept for five years.
This procedure has the following associated benefits for SMEs:
- Special exemptions for blue returns
- Deduction of up to 650,00 JPY if documents showing regular bookkeeping such as balance sheet and income statement are filed within the statutory tax return due date
- Deduction of up to 100,00 for other blue return filers.
- Salary payments to family employees exclusively engaged in the business of the blue return filer can be included as necessary expenses,
- Allowance of uncollectible receivables
- Revenue losses may be carried forward for three years or carried back to the previous year,
More information: NTA