If you are a foreigner living in Japan, you may have heard of Furusato Nozei（ふるさと納税）, aka hometown tax payment. It is a unique tax system that allows you to support local communities in Japan while reducing your tax bill. In this article, we will explain what Furusato Nozei is, how it works, and how you can take advantage of it.
What is Furusato Nozei?
Furusato Nozei, which literally means 'hometown tax', is a system whereby individuals and companies can donate money to local communities in Japan and receive a tax deduction. The system was introduced in 2008 to support local communities and encourage people to contribute to their hometowns.
The program was rolled out to support and revive rural communities in Japan that suffer from dwindling populations. This is called a “tax” programme, but think of it more like a donation.
How does Furusato Nozei work?
When you make a donation through Furusato Nozei, you can choose the community you would like to donate to. The donation can be used to support various projects and initiatives in the chosen community, such as local festivals, cultural events and infrastructure improvements.
In return, you will receive an income tax rebate and a resident tax credit for the portion of your donation that exceeds ¥2,000. This is an attractive scheme and you may even receive a thank-you gift such as a local speciality.
How do I participate in Furusato Nozei?
To participate in Furusato Nozei, you must make a donation to a local community through the official Furusato Nozei website or by post. The website provides a list of communities registered to participate in the programme, their donation projects and the amount of tax deduction you can receive.
When making a donation, you will need to provide your personal details, such as your name and address. You will also need to specify the community you wish to donate to and the amount you wish to donate.
Once you have made your donation, you will receive a receipt from the local authority, which you can use to claim a tax deduction on your national and local income tax.
Are foreigners eligible for Furusato Nozei?
Yes, you can. The scheme is open to all tax-paying residents of Japan. It was originally designed with those who had left rural Japan for Tokyo in mind, as a way of supporting their hometowns. But this is only a suggestion. Or many choose not to support the city or prefecture where they grew up, but rather those that offer the best gifts.
You can donate to Furusato Nozei through the following websites (Japanese only):
Benefits of Furusato Nozei
There are several benefits to participating in Furusato Nozei. Firstly, you can support local communities in Japan and contribute to their development.
Second, you can receive a tax deduction on your national and local income taxes, which can help reduce your tax bill. However, in the Furusato Nozei, a larger donation doesn’t necessarily mean more tax deductions. Your maximum donation is determined by your family structure, annual income, and tax deductions that you already receive.
Third, you may receive gifts or products from the community as a token of appreciation for your donation.
Conclusion
Furusato Nozei is a unique tax system in Japan that allows you to support local communities while reducing your tax bill. By participating in the programme, you can contribute to various projects and initiatives in your chosen community and receive a tax deduction on your national and local income taxes. As a foreigner living in Japan, you can take advantage of this system to support the country and its people.