Is it true that "if a corporation runs a loss, it can offset it for 10 years as long as it files a blue tax return"?

“If a corporation runs a loss, it can offset it for 10 years as long as it files a blue tax return.” If you run a company, you may have heard this at some point. We checked the text of the tax laws to see how far this “10 years” really applies.

Note that “offset” is how people usually put it. In the tax laws the term is “carryforward deduction” (kurikoshi kōjo), meaning subtracting the loss from the year’s income. From here on, this article writes “carryforward deduction (subtracting it from the year’s income).”

Five tax terms, explained first

Here are plain-language explanations of the terms used in this article.

• Blue tax return (aoiro shinkoku) = a return filed on blue-colored forms with the approval of the head of the tax office. For individuals, it is available to people who have real estate income, business income, or forestry income.
• Net loss (junsonshitsu) = the part of an individual’s loss that could not be fully absorbed even after offsetting losses against other income (sonneki tsūsan).
• Tax loss (kesson-kin) = a corporation’s loss.
• Carryforward deduction (kurikoshi kōjo) = carrying a year’s loss over to later years and subtracting it from those years’ income.
• Small and medium-sized corporations, etc. (chūshō hōjin-tō) = a collective name for ordinary corporations with paid-in capital of ¥100 million or less, entities with no capital or investment, public interest corporations, cooperatives, and similar entities. Wholly owned subsidiaries, etc. and large corporations under the group taxation system (daitsūsan hōjin) are excluded (a subsidiary of a large company is not a small or medium-sized corporation, etc., even if its capital is ¥100 million or less).

Conclusion

Our verdict is “TRUE, with conditions.” A corporation’s loss (tax loss) can be subtracted from the income of a business year as long as it arose in a business year that began within 10 years before the start of that business year (9 years for losses from business years that began before April 1, 2018 (Heisei 30))［4］［6］. The conditions are that you filed the final tax return for the loss-making business year as a blue tax return, that you keep filing final tax returns every year afterward, and that you keep the books and records［6］. A corporation other than a small or medium-sized corporation, etc. can deduct only up to 50% of the income for that business year［6］.

“Blue tax return” is a term that exists for both individuals and corporations. An individual’s blue tax return lets you carry a loss forward for 3 years, so the number of years is different［1］［5］. We explain the individual case in the “pitfalls” section below.

For corporations, it is 10 years

For corporation tax, Article 57 of the Corporation Tax Act sets the carryforward. The number of years is “within the ten years before.”

内国法人の各事業年度開始の日前十年以内に開始した事業年度において生じた欠損金額［4］

Reference translation (unofficial): the amount of tax loss arising in a business year that began within ten years before the start of each business year of a domestic corporation

In plain English: a corporation's (domestic corporation's) tax loss can be subtracted from income as long as it arose in a business year that began within 10 years before the start of that business year (the quotation above is in the original Japanese).［4］

The NTA’s explanation says the same.

確定申告書を提出する法人の各事業年度開始の日前10年（注）以内に開始した事業年度で青色申告書を提出した事業年度に生じた欠損金額は、各事業年度の所得金額の計算上損金の額に算入されます。［6］

Reference translation (unofficial): A tax loss arising in a business year for which a blue tax return was filed, and which began within 10 years (note) before the start of each business year of a corporation that files a final tax return, is included in deductible expenses when calculating the income for each business year.

Excerpt from the original NTA page in Japanese. The NTA's explanation says 10 years. The note in parentheses says that the period is 9 years for losses from business years that began before April 1, 2018 (Heisei 30).［6］

Corporations also have conditions for using it.

欠損金額が生じた事業年度において青色申告書である確定申告書を提出し、かつ、その後の各事業年度について連続して確定申告書を提出するとともに、その事業年度に係る一定の帳簿書類（注1）を保存している法人です。［6］

Reference translation (unofficial): A corporation that filed a final tax return as a blue tax return for the business year in which the tax loss arose, has filed final tax returns consecutively for each business year after that, and keeps certain books and records (note 1) for that business year.

Excerpt from the original NTA page in Japanese. A corporation can use it if it filed a blue tax return for the loss-making business year, has kept filing final tax returns consecutively after that, and keeps its books and records.［6］

For a corporation, if the loss-making year was filed as a blue tax return, it can use the carryforward deduction for that loss even if later returns are white tax returns.

欠損金額が生じた事業年度において青色申告書である確定申告書を提出していれば、その後の事業年度について提出した確定申告書が白色申告書であっても、その欠損金額についてはこの繰越控除の規定の対象となります。［6］

Reference translation (unofficial): If a final tax return that is a blue tax return was filed for the business year in which the tax loss arose, that tax loss is covered by this carryforward deduction rule even if the final tax returns filed for later business years are white tax returns.

Excerpt from the original NTA page in Japanese. If you filed the return for the loss-making business year as a blue tax return, the loss can be carried forward even if later returns are white tax returns.［6］

Also, a corporation other than a small or medium-sized corporation, etc. cannot subtract the whole carried-forward loss. The limit is 50% of the income for that business year.

（4）平成30年4月1日から開始事業年度：100分の50［6］

Reference translation (unofficial): (4) Business years beginning on or after April 1, 2018 (Heisei 30): 50/100

This is the row for the current business years in the rate table shown by the NTA. The limit is the amount you get by multiplying the income before the carryforward deduction, for the business year in which the deduction is taken, by this rate.［6］

This “small and medium-sized corporations, etc.” category excludes wholly owned subsidiaries, etc. and large corporations under the group taxation system. Even with capital of ¥100 million or less, a subsidiary of a large company is not a small or medium-sized corporation, etc., and is subject to the 50% limit［6］.

中小法人等とは、普通法人（投資法人、特定目的会社および受託法人を除きます。）のうち、資本金の額もしくは出資金の額が1億円以下であるもの（100パーセント子法人等（※1）および大通算法人（※2）を除きます。）または資本もしくは出資を有しないもの、公益法人等、協同組合等、人格のない社団等をいいます。［6］

Reference translation (unofficial): “Small and medium-sized corporations, etc.” means ordinary corporations (excluding investment corporations, specific purpose companies, and trust corporations) whose capital or investment amount is ¥100 million or less (excluding wholly owned subsidiaries, etc. (note 1) and large corporations under the group taxation system (note 2)), or that have no capital or investment, as well as public interest corporations, etc., cooperatives, etc., and associations without legal personality, etc.

Excerpt from the original NTA page in Japanese. Even with capital of ¥100 million or less, wholly owned subsidiaries, etc. and large corporations under the group taxation system are not small or medium-sized corporations, etc.［6］

The 50% limit has exceptions. The limit does not apply to a newly established corporation up to the day 7 years pass from its establishment (among ordinary corporations, excluding wholly owned subsidiaries, etc. and parent corporations that wholly own a company through a share transfer), or to certain business years of a corporation to which a certain event has occurred, such as a decision to commence rehabilitation proceedings［6］.

A corporation also has a way to send the loss back to an earlier business year instead of carrying it forward (a refund through a carryback of the tax loss). It can carry the tax loss back to any business year that began within 1 year before the start of that business year and claim a refund of corporation tax［7］. However, in principle this system is not available to corporations other than small and medium-sized enterprises, etc.［7］.

青色申告書である確定申告書を提出する事業年度に欠損金額が生じた場合（以下、この事業年度を「欠損事業年度」といいます。）において、その欠損金額をその欠損事業年度開始の日前1年以内に開始したいずれかの事業年度（以下「還付所得事業年度」といいます。）に繰り戻して法人税額の還付を請求することができます。［7］

Reference translation (unofficial): Where a tax loss arises in a business year for which a final tax return that is a blue tax return is filed (this business year is hereinafter called the “loss business year”), the tax loss can be carried back to any business year that began within one year before the start of the loss business year (hereinafter the “refund-income business year”), and a refund of corporation tax can be claimed.

Excerpt from the original NTA page in Japanese. A corporation's tax loss can be carried back to a business year that began within the previous 1 year, and a refund of corporation tax can be claimed.［7］

この制度は、中小企業者等（注）以外の法人の平成4年4月1日から令和10年3月31日までの間に終了する各事業年度において生じた欠損金額については適用しないこととされています［7］

Reference translation (unofficial): This system does not apply to tax losses arising in business years ending between April 1, 1992 (Heisei 4) and March 31, 2028 (Reiwa 10) of corporations other than small and medium-sized enterprises, etc. (note)

In principle, corporations other than small and medium-sized enterprises, etc. cannot use it. The scope of covered corporations is the "small and medium-sized enterprises, etc." in No.5763, whose definition is slightly different from the "small and medium-sized corporations, etc." in No.5762.［7］

An individual’s blue tax return gives 3 years

For individual income tax, Article 70 of the Income Tax Act sets the carryforward deduction. The number of years is “within three years of the years before.”

その年の前年以前三年内の各年（その年分の所得税につき青色申告書を提出している年に限る。）において生じた純損失の金額［1］

Reference translation (unofficial): the amount of net loss arising in each of the years within three years up to the year before that year (limited to years for which a blue tax return was filed for that year’s income tax)

In plain English: a loss (net loss) can be carried forward from each of the 3 years up to the year before that year. As the parentheses say, the condition is that you filed a blue tax return for that year (the quotation above is in the original Japanese).［1］

The count starts from the year after the loss-making year and runs for 3 years. For example, if you have a loss in 2026 (Reiwa 8), you can subtract that loss from profits over the 3 years of 2027, 2028, and 2029 (Reiwa 9, 10, and 11).

The NTA’s explanation says the same.

その損失額を翌年以後3年間にわたって繰り越して、各年分の所得金額から控除します。［5］

Reference translation (unofficial): The loss amount is carried forward for 3 years from the following year and deducted from the income amount of each year.

Excerpt from the original NTA page in Japanese. The NTA's explanation says 3 years.［5］

Only people who file a blue tax return can use it. The blue tax return is a system you can use with the approval of the head of the tax office.

不動産所得、事業所得又は山林所得を生ずべき業務を行なう居住者は、納税地の所轄税務署長の承認を受けた場合には、確定申告書及び当該申告書に係る修正申告書を青色の申告書により提出することができる。［2］

Reference translation (unofficial): A resident who carries on a business that produces real estate income, business income, or forestry income may, if approved by the head of the tax office with jurisdiction over the place of tax payment, file a final tax return and an amended return relating to that return on a blue-colored return form.

In plain English: among sole proprietors and the like, people approved by the head of the tax office can file a blue-colored return (the quotation above is in the original Japanese).［2］

Pitfalls: telling the two apart

First, here are the terms and the number of years side by side.

Beyond this, there are six cautions.

First, the term “blue tax return” exists for both individuals and corporations. The 10 years in this article is the corporation’s number of years, and an individual’s blue tax return gives 3 years. It does not apply to sole proprietors［1］［4］［5］.

Second, a corporation’s 10 years applies from business years beginning on or after April 1, 2018 (Heisei 30). Losses from before that are carried forward for 9 years［6］.

Third, a corporation other than a small or medium-sized corporation, etc. can subtract only up to 50% of the income for that business year［6］.

Fourth, an individual has a way to send the loss back to the previous year instead of carrying it forward. If the previous year was also a blue tax return, the individual can claim a refund of the previous year’s income tax［3］［5］.

純損失の繰越しに代えて、その損失額を生じた年の前年分の所得金額に繰り戻して控除し、前年分の所得税額の還付を受けることもできます。［5］

Reference translation (unofficial): Instead of carrying the net loss forward, you can also carry the loss amount back to the income amount of the year before the year in which it arose, deduct it there, and receive a refund of the previous year’s income tax.

Excerpt from the original NTA page in Japanese. A person who filed a blue tax return for the previous year as well can receive a refund of the previous year's income tax instead of carrying the loss forward.［5］

Fifth, in the case of a disaster, an individual’s 3 years may become 5 years.

令和5年4月1日以降に特定非常災害の指定を受けた災害より生じた純損失の金額につき、以下の場合には、次の損失額について繰越控除期間が3年間から5年間へと延長されます。［5］

Reference translation (unofficial): For the amount of net loss arising from a disaster designated as a specified extraordinary disaster on or after April 1, 2023 (Reiwa 5), in the following cases the carryforward deduction period for the following loss amounts is extended from 3 years to 5 years.

Excerpt from the original NTA page in Japanese. For a loss from a disaster designated as a specified extraordinary disaster, the loss can be carried forward for 5 years if the conditions are met. The conditions are set out in detail, so please check the NTA page.［5］

Sixth, when a company with a loss is taken over, its earlier losses may become unusable. If, within 5 years after another person comes to hold more than 50% of its shares (a specified controlling relationship), the company stops all of its former business and takes on borrowings, etc. of more than about 5 times the scale of that business, it can no longer carry forward the losses from before that time (the restriction on loss-making corporations, etc.)［6］.

ただし、他の者による特定支配関係（注2）を有することとなった欠損金額等を有する法人（欠損等法人）が、その特定支配関係を有することとなった日（以下「特定支配日」といいます。）から5年以内に、旧事業（特定支配日の直前において営む事業）のすべてを廃止するとともに、その旧事業の事業規模のおおむね5倍を超える資金の借入れ等を行うことなどの一定の事由に該当するときは、その該当する日の属する事業年度（以下「適用事業年度」といいます。）以後の各事業年度においては、その適用事業年度前の各事業年度に生じた欠損金額については、この繰越控除の規定は適用されません。［6］

Reference translation (unofficial): However, where a corporation that has tax losses, etc. and has come to have a specified controlling relationship (note 2) with another person (a loss-making corporation, etc.) falls under certain grounds within 5 years from the date on which it came to have that specified controlling relationship (hereinafter the “specified controlling date”), such as abolishing all of its former business (the business it was carrying on immediately before the specified controlling date) and borrowing funds, etc. exceeding roughly 5 times the scale of that former business, this carryforward deduction rule does not apply, in the business years from the business year that includes that date (hereinafter the “applicable business year”) onward, to the tax losses arising in the business years before the applicable business year.

Excerpt from the original NTA page in Japanese. If a company with a loss comes to be held more than 50% by another person, then within 5 years stops all of its former business and takes on borrowings, etc. of more than about 5 times the scale of that business, its earlier losses can no longer be carried forward.［6］

There are requirements besides the number of years

The number of years is decided by the type of loss and by the law. Separately from that, you must also meet the following requirements.

Note that an individual can carry forward a net loss arising from a loss on fluctuating income or a loss on damaged business assets even without a blue tax return (limited to those specified by Cabinet Order).［1］

Even if you filed a blue tax return in the loss-making year, you cannot use the loss if you do not file final tax returns for the following years.

純損失の金額が生じた年分の所得税につき確定申告書を提出し、かつ、それぞれその後において連続して確定申告書を提出している場合に限り、適用する。［1］

Reference translation (unofficial): This applies only where a final tax return has been filed for the income tax of the year in which the net loss arose, and final tax returns have been filed consecutively thereafter in each year.

In plain English: you can use the carryforward deduction only if you filed the final tax return for the year in which the net loss arose and have kept filing final tax returns consecutively afterward (the quotation above is in the original Japanese).［1］

What to do

Summary

“If a corporation runs a loss, it can offset it for 10 years as long as it files a blue tax return” is TRUE, with conditions. There is a system that lets a corporation carry its loss (tax loss) forward for 10 years after the year it arises and subtract it from each year’s income. However, there are conditions to use it.

• For corporations it is 10 years. A tax loss from a business year that began within 10 years before the start of each business year can be included in deductible expenses［4］［6］.
• To use it, you must have filed the final tax return for the loss-making business year as a blue tax return, keep filing final tax returns every year afterward, and keep the books and records［6］.
• A corporation’s 10 years applies from business years beginning on or after April 1, 2018 (Heisei 30). Earlier losses are carried forward for 9 years［6］.
• A corporation other than a small or medium-sized corporation, etc. can subtract only up to 50% of the income for that business year. Wholly owned subsidiaries, etc. and large corporations under the group taxation system are excluded from small and medium-sized corporations, etc., and the limit does not apply to a newly established corporation within 7 years of establishment, among others［6］.
• Caution: when a company with a loss is taken over (if, within 5 years after a specified controlling relationship arises, it stops all of its former business and takes on borrowings, etc. of more than about 5 times the scale of that business), it can no longer carry forward its earlier losses［6］.
• Caution: an individual’s blue tax return gives 3 years. The “10 years” in this article is about corporations, so it does not apply to sole proprietors［1］［5］.

If you remember only the number of years, you will mix up individuals and corporations. First, check which kind of return you file.

Sources

• ［1］Income Tax Act, Article 70 (carryforward deduction of net losses; e-Gov Law Search, Japanese)　Checked: 2026-10-18
• ［2］Income Tax Act, Article 143 (blue tax return; e-Gov Law Search, Japanese)　Checked: 2026-10-18
• ［3］Income Tax Act, Article 140 (claim for refund through carryback of net loss; e-Gov Law Search, Japanese)　Checked: 2026-10-18
• ［4］Corporation Tax Act, Article 57 (carryforward of tax losses; e-Gov Law Search, Japanese)　Checked: 2026-10-18
• ［5］No.2070 Blue tax return system — NTA Tax Answer (Japanese)　Checked: 2026-10-18
• ［6］No.5762 Carryforward deduction of tax losses for business years in which a blue tax return was filed — NTA Tax Answer (Japanese)　Checked: 2026-10-18
• ［7］No.5763 Refund through carryback of tax losses — NTA Tax Answer (Japanese)　Checked: 2026-10-18

Note: This article is based on laws and official information as of October 18, 2026. It is a translation of the Japanese original; if the two differ, the Japanese version prevails. Quotations from laws and official sources are given in the original Japanese, followed by unofficial reference translations. Sources are based on laws (e-Gov) and official materials of the NTA, all in Japanese. If a correction is needed after publication, a correction record will be added at the end of this article (Correction policy).