Instead of paying only taxes, turn the Tax Payments into Free Goods.
Furusato nozei is a system that allows you to redirect your tax payments to a rural community in exchange for gifts. As you have to pay tax anyway, this is an opportunity for free stuffs. This article will cover everything you need to know to use your taxes payment wisely in Japan.
What is furusato nozei, aka hometown tax payment?
The Furusato Nozei Program is a tax system that exempts taxpayers from income and resident tax if they make donations to a municipality outside of central Tokyo that they wish to support. The goal is for donors to support local governments while receiving gifts for their tax money they donate.
The program was rolled out to support and revive rural areas in Japan that suffer from ( Shoushika )dwindling populations.
Simply put: pay the same amount of tax, but to a different part of Japan, and get free gifts in return !
Are foreigners eligible for furusato nozei?
Yes, everyone is eligible as long as you keep paying taxes. Every tax-paying resident in Japan is eligible to participate in the system.
What do I get?
In fact many luxury items! Offerings range from local produce that can be as fancy as king crabs or high-end sake, or quite simple like a crate of apples or a bag of rice. On the other end of the spectrum, there were gifts like Amazon gift cards.
These are some interesting gift options we found on Rakuten included:
【ふるさと納税】【お届け月が選べる】都城産「前田さん家のスウィートポーク」肉肉肉4kgセット – ブランド豚 ロース バラ 切り落とし ミンチ 合計4kg 送料無料 MJ-8913【宮崎県都城市は令和2年度ふるさと納税日本一！】
|【ふるさと納税】【訳あり】 牛肉 ハラミ 牛ハラミ タレ漬け 1.6kg 焼肉 BBQ 肉厚 ジューシー コロナ 支援|
There are many more !
My company does my tax for me, can I still participate in furusato nozei?
Yes, you can. Most people that participate in the scheme are salaried employees and typically don’t do their own tax. In that case, you can still do your own Tax [Kakutei Shinkoku].
If you do your own tax (as most freelancers and contractors do), you first do your hometown tax donation and then claim back what you donated later for the following year.
One flaw in the system is that you have to put your donation for furusato nozei in by December 31st. However, you won’t receive your final tax statement for the whole year until January. So you have to make your calculations based on last year’s salary, if there were no big changes. There are online tools (Its in Japanese though ) that let you punch in the numbers from your pay stubs and calculate how much of your tax is eligible for a furusato nozei donation, or you can also check on this table as below :
※Please note the limit of your furusato nozei might vary depending on other Tax deductions applied to you.
|Husband & Wife|
with 1 Child
|Husband & Wife|
with 1 Child
How does furusato nozei work?
Quite simple, take the amount that you calculated as eligible for deduction and go shopping on the furusato nozei sites for gifts. Keep the receipts and when you do your annual tax return, put the amount you spent down as a donation and submit the receipts together with your tax return.
So even though your company does your taxes, you will now need to do a tax return to claim back the donation you made through furusato nozei (i.e. have it deducted from your tax payments for the following year). You can hand in your tax return at your ward’s tax office until mid-March every year. The cut-off date is slightly different each year. If you are unsure how to fill out the forms in Japanese, check your ward’s website. They offer English assistance where someone will sit down and fill out the forms with you. You need to get an appointment for this, so don’t leave it until the last day!
Each municipality has a slightly different method of processing hometown tax donations, so make sure to familiarize yourself with the steps on their website. If that sounds too cumbersome, especially if you are not fluent in Japanese, there are also several sites that coordinate furusato nozei. Instead of applying directly through a muncipality’s website, you just apply through the coordinating website in a process that is very similar to online shopping—and they take care of the rest for you. The website will issue you a receipt that is needed to claim your tax deduction and also coordinate the gift-sending to you.
Is Furusato Nozei free?
Furusato Nozei is not free. It costs 2,000 yen per year.
Paying 2,000 yen means that if you donated 60,000 yen, only 58,000 yen would be deducted from your tax, which is a really good deal.
In general, the procedure for Furusato Nozei is:
- Make the Hometown Tax payment through a municipality’s or coordinating website. You will be sent both the thank-you gift and a receipt of your donation that will be needed later for your tax return.
- File your income tax return at your ward’s tax office by mid-March of the following year. You need to submit the receipt as proof of your donation.
- For income tax exemption: When filing your tax return, income tax will be deducted for the year in which you made a furusato nozei donation.
- For resident tax exemption: When filing your tax return, resident tax will be deducted for the following calendar year after you made a furusato nozei donation.
There is a limit to tax deductions depending on your income and number of people in your household. Punch your details into a simulator to calculate the right amount. As a rule of thumb, you can use 20% of your resident tax for furusato nozei.
A one-time processing fee of ¥2,000 will be due. You can decide to donate your tax to only one town or spread it among several, the processing fee will only be due once. If you use one of the organizing websites, they will collect the fee, organize the shipping of all the goods and send you one invoice for all the donations made, which makes things a bit easier come tax-return season.
When is the deadline?
While tax returns are due each year in mid-March, furusato nozei closes in December! So if you want to take advantage of your tax paid during 2020, start looking at how much you can write off and “spend” on hometown tax before the end of the calendar year.