When you go independent as a freelancer or sole proprietor, the first tax procedures you need to handle are simple. It starts with submitting two forms to the tax office: the "business opening notification" and the "application for blue-form approval." The blue return in particular is the most important point in the early days of your business, because if you miss the filing deadline you cannot use it that year and forfeit a deduction of up to ¥650,000. This article organizes, in order, everything from the documents to submit when opening a business, the deadlines, the benefits of the blue return, and switching your social insurance — so you won't get lost right after going independent.
Documents to submit when opening a business, and their deadlines
| Document | Submit to | Deadline |
|---|---|---|
| Notification of opening/closing of a personal business, etc. (business opening notification) | Tax office | Within 1 month of opening |
| Application for blue-form approval for income tax | Tax office | Within 2 months of opening (if you open on or before January 15 of that year, by March 15) |
| Notification concerning salaries for blue-return full-time family employees (if you pay a salary to family) | Tax office | By March 15 of the year of application (within 2 months for opening/hiring) |
| Notification of establishment of a salary-paying office, etc. (if you hire employees) | Tax office | Within 1 month of establishment |
If you do not submit the application for blue-form approval, you automatically become a white-form filer, and for that year you cannot use any of the ¥650,000, ¥550,000, or ¥100,000 blue special deductions. The safe approach is to submit it at the same time as the business opening notification.
Benefits of the blue return (differences from the white return)
In exchange for keeping books such as double-entry bookkeeping, the blue return offers several tax advantages. For a detailed comparison with the white return, see The blue return vs. the white return.
① Blue special deduction: with double-entry bookkeeping + e-Tax or electronic book retention, ¥650,000 (¥550,000 for paper financial statements / ¥100,000 for simple bookkeeping)[No.2072]
② Carryover of losses: carry a loss forward for 3 years to offset against future profits
③ Salaries for blue-return full-time family employees: fully deduct as expenses the salary paid to family members who share the same household finances
④ Special provision for low-value depreciable assets: expense equipment costing under ¥300,000 all at once (up to ¥3 million in total)
The eligible amount for this special provision is currently under ¥300,000 (through March 31, Reiwa 8), but under the Reiwa 8 tax reform it is set to be raised to under ¥400,000 from April 1, 2026, with the application period also extended through March 31, Reiwa 11 (the ¥3 million total cap is kept unchanged)[National Tax Agency No.5408].
Registering for invoices (qualified invoices) is optional
Whether you become a qualified-invoice-issuing business for consumption tax when you open is optional. If your clients are mainly taxable businesses, you will often be asked to register; if you deal with consumers or tax-exempt businesses, not registering is also an option. Including the point that registering creates an obligation to file consumption tax, check the material for your decision in The invoice system and tax-exempt businesses.
Switching social insurance and the National Pension (for those going independent from being an employee)
If you leave a company to go independent, your health insurance switches to National Health Insurance (or voluntary continuation of your former employer's plan), and your pension switches to the National Pension (Category 1 insured person). These premiums can be fully deducted on your tax return as the social insurance premium deduction. For the switching procedures from being an employee, also refer to Taxes and procedures when changing jobs or resigning.
Things that make life easier if you do them right after opening
- Separate your business bank account and credit card: keeping them from mixing with private use makes managing expenses and keeping books far easier all at once.
- Introduce accounting software early: software that supports the blue return's double-entry bookkeeping and electronic book retention makes it easier to meet the requirements for the ¥650,000 deduction.
- Keep receipts and invoices: in principle, retain them for 7 years (blue return). Electronic transaction data must be retained electronically as is.
- A trade name is optional: if you want to open a trade-name account, noting the trade name on your business opening notification makes it smoother.
FAQ
Is there a penalty for not submitting the business opening notification?
Submission is an obligation, but no direct penalty is set for submitting it late. However, since it is needed for blue-return approval and for opening a trade-name account, submit it within 1 month of opening.
By when must I apply for the blue return?
In principle, within 2 months of opening (if you opened on or before January 15 of that year, by March 15). If you miss the deadline, you file as a white-form filer for that year and cannot use the blue special deduction.
Can an employee with a side business also submit a business opening notification and use the blue return?
It is possible if you have the scale and substance recognized as business income. However, if the side business does not reach a business-like scale, it becomes miscellaneous income and you may not receive the benefits of the blue return (see Filing a tax return for a side business).
Can start-up costs be treated as expenses?
Costs spent before opening can be treated as "start-up costs," a deferred asset, and amortized (expensed) in any year of your choosing. Adjustments are possible, such as recording them all at once in a year when you have a profit.
Summary
Reference links (sources)
This article is based on the following published materials from the National Tax Agency (neutral, primary sources). Requirements and deduction amounts are subject to revision, so please check the latest content before applying.
- National Tax Agency No.2090 Notifications when newly starting a business, etc. (in Japanese)
- National Tax Agency No.2070 The blue return system (in Japanese)
- National Tax Agency No.2072 Blue special deduction (in Japanese)
- National Tax Agency No.5408 Special provision for low-value depreciable assets (in Japanese)
* This article is general information, not tax advice. For individual decisions, please confirm with a tax office or a tax accountant.