The end of the year is fast approaching, it's time to settle Furusato Nouzei! Shop for thank you gifts and lock in on the tax deductions before the deadline! Tako is looking forward to getting more egg pudding again!
Understanding Furusato Nouzei
What is Furusato Nouzei?
Furusato Nouzei ふるさと納税 literally translates to Hometown Tax. It is a special tax scheme introduced by the Japanese Government to support smaller less developed communities and areas in Japan.
How does it work?
Taxpayers donate money to a municipality of their choice. In return, the taxpayer receives a thank you gift and tax deductions.
How is it a donation if you get gifts in return? Wouldn't municipalities with popular gifts get all the donations?
Currently, the government has stated that the gifts offered shall not exceed 30% of the amount donated.
How does the tax deduction work?
Tax is imposed on your taxable income for the entire year, so more taxable income = more tax imposed. By doing Furusato Nouzei, the amount donated minus a 2,000 yen processing fee will be deducted from your taxable income. The result? Less taxable income = less tax to pay. Plus a gift! Wee!
Can foreigners do it too?
Yes, as long as you are a taxpayer in Japan you can join!
How much tax deductions can I get?
The amount of tax deductible depends on 2 things; your income level and your household composition. To find out your maximum deductible amount, check this table provided by the Ministry of Internal Affairs and Communications, or use the online simulators provided by Satofull or Furusato Choice.
Can I only donate up to my maximum deductible amount?
No, there is no limit to how much you can donate. However, you will not receive any tax deductions past the maximum deductible amount.
What kind of thank-you gifts can I receive?
It varies between municipalities. Municipalities usually offer food, drinks or handicrafts that are produced locally. Those with popular tourist destinations may offer free hotel/ryokan stay and park visits, although those may ask for a bigger donation.
Is there a deadline?
You'll need to complete your donations by 31st December of the tax year. If you miss the deadline, the tax deduction will only be applied the following year.
Furusato Nouzei Procedure
- Calculate your maximum deductible amount.
- Go to a recognized Furusato Nouzei website like Satofull or Furusato Choice to make a donation and choose your thank-you gift.
- Receive your gift and donation certificate.
- Report your donation when you file your tax return or complete the one-stop exemption system.
- Receive tax deduction for the following year.
One-Stop Exemption System
Previously, filing a tax return was the only way to claim tax deduction for Furusato Nouzei. However, after the introduction of the One-Stop Exemption System ワンストップ特例制度, there is now an alternative easier way. The catch? You need to satisfy the following conditions:
- You do not need to file a tax return (確定申告）
- You donated to less than 5 municipalities in the same year
Also be careful when doing your thank-you gift shopping, Tako and Pancake discovered that some items are not eligible for the one-stop exemption system! Pancake did a tax return just to get those hamburg steaks!
One-Stop Exception System Procedure
- Fill in the application form → 寄附金税額控除に係る申告特例申請書. Some municipalities include it in your thank-you gift parcel. If not, you can download it here.
- Prove of your My Number. It could be one of the following:
a. A copy of your My Number Card (個人番号カード）
b. A copy of your My Number Notice Card with your current address (通知カード)
c. Certificate of Residence (住民票) with My Number details printed + an ID (driving license, residence card etc.) that matches the address on the 住民票
- Submit documents from 1. & 2. to the local municipality. You need to do this for every municipality you donated to.
For the One-Stop Exception System, the donation certificate is not necessary. But keep it safe just in case you end up having to do a tax return.
Any questions ? Reach us on Twitter and we'll do our best to help! Have fun shopping!
以上 Until next time ◉‿◉