Accounting in Japan: the blue return, double entry and the qualified invoice

Grandfather's ledger

Misaki Tanaka inherited her grandfather's wagashi shop, selling traditional Japanese sweets on a quiet street in Kyoto. With the shop came a Japanese abacus, the soroban, and a thick hand-sewn account book of the kind Japanese merchants called a daifukuchō. Her grandfather wrote every sale in it with a brush, and never needed anything else.

Misaki does. A chain of cafés wants to sell her sweets and asks for invoices with a registration number. Her tax adviser also suggests switching to the blue tax return to pay less tax. Both require the same thing: books kept by double entry.

1873: the year double entry arrived

The Western method reached Japan with the modernisation of the Meiji era. In 1873 Fukuzawa Yukichi published Chōai no hō, his translation of an American bookkeeping textbook by Bryant and Stratton. In the same year the Ministry of Finance published Ginkō boki seihō, based on the lessons of the Scottish banker Alexander Allan Shand to officials and staff of the country's first national bank, and regarded as the first book of its kind in Japan.

There is a detail Misaki enjoys: Fukuzawa's face was on the 10,000 yen note from 1984 to 2024. Since July 2024 the note has carried Shibusawa Eiichi, founder of that first national bank. Japan's largest note went from the man who translated that textbook to the founder of the bank whose staff studied with Shand.

White return or blue return

A sole proprietor in Japan files income tax each year for the previous calendar year, between 16 February and 15 March. There are two ways to do it:

• The white return (shiro iro shinkoku): needs no prior approval and allows simple bookkeeping, but gives no tax advantages.
• The blue return (ao iro shinkoku): must be applied for at the tax office and requires the books the law sets out. In return it allows deducting the wages of family members who work in the business, carrying losses forward for three years and a special deduction.

The special deduction depends on how the books are kept. Today it is up to 650,000 yen with double entry, a balance sheet and a profit and loss statement filed electronically (e-Tax) or with electronic books that meet certain requirements; 550,000 with double entry on paper; and 100,000 with simple bookkeeping. The 2026 tax reform plans, from the 2027 tax year, to raise the maximum deduction to 750,000 yen for those who keep electronic books and lower it to 100,000 for those who file on paper. Check the current figures with the National Tax Agency or your adviser.

Qualified invoices

Since 1 October 2023 Japan has had a qualified invoice system. For a buyer to deduct the consumption tax it pays, the supplier must give it an invoice showing its registration number, a T followed by thirteen digits, the rate applied to each item and the tax at each rate. Consumption tax is 10%, with a reduced 8% rate for food and non-alcoholic drinks not consumed on the premises.

That was Misaki's dilemma. With sales under ten million yen, her shop was exempt from consumption tax. To issue qualified invoices she had to register, and once registered she would charge and report the tax. She ran the numbers with her adviser: the café contract was worth it.

Electronic books

The Electronic Books Maintenance Act (denchō hō) changed her routine too. Since January 2024, documents received electronically, such as a PDF invoice or a receipt from an online shop, are kept in electronic form, searchable by date, amount and supplier; printing them is no longer enough. The books behind a blue return are kept for seven years.

A day at the shop, in entries

Misaki records the tax separately (the tax-exclusive method). A day of takeaway sales comes to 108,000 yen including 8%; a purchase of azuki beans comes to 54,000 yen.

At year-end, the difference between the tax received and the tax paid is what the shop pays over. Yen have no decimals: every amount is a whole number.

What Misaki did

Misaki put her grandfather's daifukuchō in a glass case, next to the soroban. Now she records sales and purchases by double entry every day, and at year-end she has the balance sheet and the profit and loss statement her blue return needs. Her adviser reviews it and files the return through e-Tax. Her grandfather, she says, would have approved: he too closed every day with the accounts in balance.

Where Aconta Online comes in

Aconta Online keeps the journal book, the general ledger, the trial balance, the income statement and the balance sheet in yen, by double entry: the books a blue return rests on. It also works in Japanese, refuses an entry that does not balance and never edits a posted one. You can add to the chart of accounts the ones your business uses. It does not issue qualified invoices, file returns through e-Tax or certify the electronic-books requirements: that stays with your adviser and the National Tax Agency's systems. The first company is free, no card required.