Furusato-nouzei and how it can help you save money in Japan
Firstly, what exactly is Furusato-nouzei (ふるさと納税)?
EXPLANATION AND MERITS
To put it simply, Furusato-nouzei is a system wherein by supporting any local government body in Japan via donation, the tax that you pay (both income tax [the tax you pay based on your income, if you earn an income in Japan], and resident tax [the tax you pay based on your income, to the municipality in where you live]) becomes cheaper. In addition, there may be some instances where you receive products that are specifically designed or made in the region that you live in, and for foreigners like us, you will have the chance to experience food or items that have been locally produced.
Note that you’re able to donate to any local government body in Japan - whether that be the one that oversees your living area, or a completely different one. What you gain will usually be publicized on that government body’s homepage, so make sure to check it out if you’re curious!
With that said, how does one apply for this?
Well, while this must come as a bit of an inconvenience, each and every local government body has its own way of application. However, in this article, we’ll introduce the most general way you will be asked to apply.
Here are the steps as listed below:
- Pick the local government body that you want to donate to:
By looking at the homepages of each local government body, you will be able to choose the one you want to support the most.
- Apply via the homepage of the local government body you want to donate to:
On the website of the local government body you’re looking at, there should be a page called Furusato-nouzei. Depending on the layout, the gifts that you will be able to receive may be introduced, and so will the local government bodies of that region in which you will be able to donate to, and for what purpose they might use that money - if a natural disaster has happened there, they might be using the money you donate in order to repair anything that was damaged, or, the money could simply be used to back up a local project that they are aiming to do in order to revitalize the economy.
During the application, you will be asked details such as the address of the place you currently live in, your name, etc = basic information. In addition, how to donate depends, again, on the local government body, but the most common form would be via credit card. Also note that the amount you are able to pay (the least and most amount of yen) are also decided by each local government body.
After the application, you will receive the gift advertised by that local government body, and also documents that are required for you to apply for something called 「確定申告」aka declaration of tax return - these documents, also called 「受領書」 will provide evidence that you have donated, so make sure to hold onto them and keep them in a safe place.
- File for tax returns
From the day that you donated to the local government body, until the next year’s March 15th, you will be able to file for tax returns. This is where the 受領書 you received will come into play. Note that filing for tax returns does not happen at your local city centre, but at your local tax office a.k.a 税務署. In addition, how to file for tax won’t differ much from city to city, but if you’re curious about how to do so in detail, try searching for information at your local tax office.
If you meet any of the following conditions, you MUST file for tax returns (there are cases in which you do not need to, which will be introduced later):
・Between the period of 1/1 and 12/31, the amount of local government bodies you donated to is up to 6 bodies or more
・You did not apply for one-stop exception (ワンストップ特例) at the local government body that you donated to
・You are a salary earner and need to pay expensive medical fees
Also note that there are many other conditions in which you would need to file for tax return - if you’re worried, check out the local tax office homepage.
- Deduction of income tax + resident tax
After you file for tax returns at your local tax office, the income tax that you have to pay in the year that you donated to the local government body will become cheaper. As for resident tax, it will become cheaper starting from the year after you donated to the local government body.
※However, please note that the amount deducted will depend on the income you get and how many members of family you have living with you.
※You may also apply for one-stop exception (ワンストップ特例）if: ①the salary that you earn from the company you work at doesn’t meet the standard it has to be in order to require you to file for tax returns at your local office. ②the number of local government bodies you donate to is 5 bodies or less. If you would like to apply for this, it simply means that you can skip the step of going all the way to the tax office and filing for tax return, but still have your income tax/resident tax become cheaper. Ask the local government body you donate to if you would like to apply and they should provide you with the necessary information and documents required for the application.
And there you have it! A guide to applying for furusato-nozei. Please note that this application does change from government to government, but this article can act as a general overview of how the process goes.
OTHER USEFUL REFERENCES
Ministry of Justice: Guide to furusato-nouzei
Furusato choice: Guide to tax return
Ministry of Internal Affairs and Communications: Guide to how your tax deduction is calculated if furusato-nouzei is done
WORDS YOU SHOULD KNOW
ふるさと納税 ふるさとのうぜい Furusato-nouzei
自治体 じちたい Local government body
寄付する きふする To donate
お礼品 おれいひん Gift of thanks
受領書 じゅりょうしょ Receipt
確定申告 かくていしんこく Tax return
税務署 ぜいむしょ Tax office
ワンストップ特例 わんすとっぷとくれい One-stop exception
所得税 しょとくぜい Income tax
住民税 じゅうみんぜい Resident tax
控除 こうじょ Deduction
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