Let’s face it: doing your taxes is no fun. This is especially true if you live in Japan, where it can come with all sorts of complications due to the language and an unfamiliar tax system. However, your taxes can be a little more fun, thanks to furusato nozei.
Translating roughly to “hometown tax,” it’s a program that lets you shift a portion of your income tax payment to different municipalities and get gifts in return. We’re talking about high-class stuff, too, like wagyu beef, expensive fruit, local crafts and even experiences like driving a train. You’ll have to pay that money anyway; why not get some cool stuff for your troubles?
That said, here is a quick guide to how furusato nozei works and how to do it.
What Is Furusato Nozei?
Furusato nozei (ふるさと納税) is a program created by the Japanese government in 2008 to help divert much-needed income tax to local municipalities hit hard by urbanization. Rather than pay all of your income tax to the place you live, you can divert some of it to a local area of your choosing. The original idea was that it would be your hometown (the furusato part), but it doesn’t have to be. Anyone can contribute to any area, regardless of connection.
Essentially a donation, you prepay a certain amount of your income tax (there’s a limit — see below) to a municipality. In return, you can claim a gift worth up to 30% of the value of the donation. Don’t think of it as shopping. Think of it as getting a gift for sending a portion of your residence tax to an alternate area and getting a reward. You will pay this tax regardless. Only now can you get something in return —besides all those sweet improvements to society your taxes already pay for (in theory).
Anyone living and paying taxes in Japan can participate. You don’t have to have a Japanese hometown to use the program. You may want to support an area that you feel deserves it, such as a city where you lived as an ALT or one that recently experienced a natural disaster. But you don’t have to. You could donate to areas strictly based on the gifts offered. It’s up to you.
How Do You Use Furusato Nozei?
Because furusato nozei is a tax-deductible, government-sponsored program, there are several rules you have to follow. You can’t just click “buy now” on a website and get some cool knives.
The four steps to follow are:
- Calculate how much you can donate in a year.
- Make a “donation” and receive your gift.
- Get the official certificate of donation in the mail.
- Declare your contribution when you file your taxes OR apply for the one-stop exception system.
Because you still need to pay taxes to your own local area, there’s a limit to how much you can spend on furusato nozei in a calendar year. To determine your limit, you’ll need to use a calculation website, such as this thorough one or a simplified one (both sites are in Japanese).
In general, someone making 5 million Japanese yen yearly can donate ¥40,000 to ¥60,000 in a single calendar year. There’s a yearly fee of ¥2,000 as well. Check with a licensed tax accountant if you have any questions.
Furusato Nozei Sites
Click here to read more.
- External Link
- https://gaijinpot.com/
2 Comments
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Gene Hennigh
This sounds great. Of course, most people would use this tax-payer friendly idea as proof of how wrong Japan is, but I wish we had this in the US. What a tax-benefit that would be here.
Bad Haircut
It's one of the few government programs done well.
The big urban municipalities don't like it that much, but it's been a boon for the regions. We've directed some taxes to rural areas across Japan and have received some great stuff in return, like wild-caught salmon and scallops from Hokkaido, tasty Kagoshima beef, slightly wonky apples from Yamagata and Aomori, and heaps more.