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 | By the income tax return deadline for the year you opened (for a 2026 opening, March 15, 2027) |
| Application for blue-form approval for income tax | Tax office | If you open on or after January 16 of that year, within 2 months of the opening date / if you open on or before January 15, by March 15 of that year |
| 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 | Not required if you file the business opening notification (see below). Otherwise, within 1 month of establishment |
It used to be "within 1 month of the day the business started." The Reiwa 7 tax reform amended Article 229 of the Income Tax Act, and since January 1, Reiwa 8 (2026) the deadline is "by the income tax return deadline for the year in which that fact occurred"[National Tax Agency A1-5][Income Tax Act art. 229]. If you opened during 2026, filing by the Reiwa 8 income tax return deadline (March 15, 2027; the next business day if that falls on a weekend or holiday) is on time. Articles and books that say "within 1 month of opening" no longer match the law.
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.
The National Tax Agency pages do not spell out what happens if you are late. However, Article 144 of the Income Tax Act sets the application deadline for someone seeking approval "for that year and subsequent years," and no provision grants approval for that year on an application filed after the deadline (the deemed approval in Article 147 also assumes an application filed on time)[Income Tax Act arts. 144, 147]. From the structure of the law, the conclusion is that you file as a white-form filer for that year and the blue return starts from the following year.
Filling in the opening notification: occupation, trade name, type of income, and outline of the business
The business opening notification is a single sheet. Most of it is your name, address, and phone number, so the only boxes that give people trouble are these four.
| Box | How to fill it in |
|---|---|
| Occupation | State the content of your occupation concretely. The instructions for the opening notification say nothing about this box, but the instructions for the blue-form application, which has the same box, give "retail of Western confectionery" as an example[National Tax Agency instructions] |
| Trade name (with a phonetic reading) | You may leave it blank. Nothing in the instructions makes it mandatory, and what the notification must state is set by Article 229 of the Income Tax Act and Article 98 of its enforcement regulations[Income Tax Act enforcement regulations art. 98]. If you plan to open a bank account under a trade name, writing it here makes things easier |
| Type of income | Three checkboxes: real estate income, timber income, and business (agricultural) income. Tick the one for the income from the business you have started |
| Outline of the business | The box itself is printed with "state this as concretely as possible." Do not stop at "web work" — write something like "contract production of corporate websites" so it is clear how you earn |
The form's "filed or not" boxes cover three documents: (1) the application for blue-form approval (or the notification to discontinue the blue return), (2) the consumption tax notification electing taxable status (or the notification of business discontinuation), and (3) the application for approval of the special due date for withholding income tax[National Tax Agency instructions]. If you intend to file blue, tick "yes" for (1) and submit the application together with the notification.
The opening notification has boxes for the "status of salary payments" and the "date you start paying salaries," where you enter the number of people, how the salary is set, and whether there is tax to withhold as of the filing date[National Tax Agency instructions]. You do not need to file the notification of establishment of a salary-paying office separately. Article 99 of the enforcement regulations of the Income Tax Act says "except where a notification under the preceding Article must be filed for that fact," and the preceding Article (98) is the opening notification[enforcement regulations art. 99]. The National Tax Agency does not state this explicitly anywhere we could find; the basis is the text of the regulations.
How to choose a trade name, and what to do if you change it later, is organized in Choosing a trade name and notifying it.
You can file on paper or through e-Tax. The opening notification can be filed with the e-Tax software on a PC, and the blue-form application can also be filed from the "My Page" of the web version of the e-Tax software[National Tax Agency A1-5][A1-8]. If you file on paper with your individual number written on it, you must show or attach a copy of identity documents; with e-Tax, neither is needed[National Tax Agency A1-5].
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 ¥400,000 all at once (under ¥300,000 for assets acquired on or before March 31, Reiwa 8; up to ¥3 million in total)
The eligible amount depends on the acquisition date. Assets acquired on or before March 31, Reiwa 8 must cost under ¥300,000; assets acquired on or after April 1, Reiwa 8 (2026) must cost under ¥400,000. The provision has also been extended through March 31, Reiwa 11[National Tax Agency No.2100]. The ¥3 million annual cap, the limitation to blue-return filers, and the requirement to attach a statement of details to your return are unchanged.
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.
A tax-exempt business that becomes a qualified invoice issuer can use the "20% special rule," which lets you pay only 20% of the consumption tax on your sales. It covers taxable periods that include a day from October 1, Reiwa 5 through September 30, Reiwa 8, so for a sole proprietor Reiwa 8 is the last year[National Tax Agency, 20% special rule].
It does not simply end there. For Reiwa 9 and Reiwa 10, a sole proprietor can use the "30% special rule," under which the tax payable is 30% of the consumption tax on sales[National Tax Agency invoice Q&A, Q114-2]. Neither rule requires a prior notification: you simply note on your return that you are applying it. The periods and what to choose next are organized in The end of the invoice 20% special rule.
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 (Choosing a trade name and notifying it).
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. Since January 2026 the deadline has been "by the income tax return deadline for the year you opened." Still, because it is needed for blue-return approval and for opening a trade-name account, it is safest to file it as soon as you open.
By when must I apply for the blue return?
If you opened on or after January 16 of that year, within 2 months of the opening date; if you opened on or before January 15, by March 15 of that year. The Income Tax Act has no provision granting approval for that year on a late application, so you file as a white-form filer for that year and the blue return starts from the following year.
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.2100 Outline of depreciation (special provision for low-value depreciable assets) (in Japanese)
- National Tax Agency A1-5 Procedure for notification of opening/closing of a personal business (in Japanese)
- National Tax Agency A1-8 Procedure for applying for blue-form approval for income tax (in Japanese)
- National Tax Agency, the 20% special rule for small businesses (in Japanese)
- e-Gov law search: Income Tax Act (arts. 229, 144, 147) (in Japanese)
* This article is general information, not tax advice. For individual decisions, please confirm with a tax office or a tax accountant.
