What is Donation Deduction of Japan ? .
Calculation of amount of Donation Deduction of Japan
Donation deduction (Donee is Government)
Donation deduction (Donee is Certified NPO or Certified incorporated association)
Hometown tax payment (FurusatoNozei) and donation deduction of Japan
As for Income tax and Furusato Nozei.
As for Resident tax and FurusatoNozei
What is Donation Deduction of Japan ?
If you (Individual, a person, Not legal entity) donates money to government, specific legal entity in Japan, you can apply for Donation Deduction of Japan and reduce amount of your taxable income and reduce amount of income tax, resident tax.
In order to apply for Donation Deduction of Japan, you need to submit tax filing (Even if you are salaried worker).
And amount of deduction differs depending on your taxable income and category of donee.
If you donate money to government of Japan, you can apply for Donation Deduction of Japan.
Other than Government of Japan, if you donate money to Certified NPO or Certified incorporated association etc (Not ordinary NPO, nor incorporated association), you can apply for Donation Deduction of Japan.
In the case of ordinary donation deduction, it can reduce amount of taxable income (ShotokuKojo).
On the other hand, donor can use Special donation deduction and it is tax credit (Zeigakukojo).
If amount of your taxable income is big (ex. 10 million yen), you will choose Shotoku Kojo.
Calculation of amount of Donation Deduction of Japan
You can calculate it by following calculation formula.
Annual amount of donation – 2000 yen = Deductible amount as donation deduction.
However Annual amount of donation should be up to 40% of your taxable income.
Example.(ShotokuKojo)
Your taxable income : 5 million yen.
You donate 1 million yen
5 million yen – 2000 – 1 million yen = 3,998,000 yen.
So you can reduce your taxable income by 3,998,000 yen.
So after application for donation deduction, amount of your taxable income is
5 million yen – 3,998,000 yen = 1,002,000 yen.
Donation deduction (Donee is Government)
Other than ShotokuKojo, you can use ZeigakuKojo. It is Tax Credit. So you can reduce amount of tax.
In the case of ZeigakuKojo = Tax Credit, calculation formula differs depending on category of donee.
If you donate money to government, calculation formula is as below.
Annual amount of donation – 2000 * 30% = Amount reduced from income tax.
However Annual amount of donation should be up to 40% of your taxable income.
ex. Your taxable income : 10 million yen.
You donate 4 million yen.
Your income tax before donation deduction : 5 million yen.
4 million yen – 2000 yen * 30% = 1,199,400 yen.(amount reduced)
5 million yen – 1,199,400 yen = 3,800,600 yen is your income tax amount after donation deduction.
Donation deduction (Donee is Certified NPO or Certified incorporated association)
Assumed that you donate money to Certified NPO (公益認定NPO) or Certified incorporated association (公益社団法人. Not 一般社団法人).
Annual amount of donation – 2000 * 40% = Amount reduced.
However Annual amount of donation should be up to 40% of your taxable income.
Amount reduced tax should be up to 25% of your income tax.
ex. Your taxable income : 10 million yen.
You donate 4 million yen.
Your income tax before donation deduction : 3 million yen.
4 million yen – 2000 yen * 40% = 1599200 yen.
1599200 yen is more than 25% of income tax.
Because 3 million yen * 25% = 750,000 yen.
So you can use 750,000 yen in stead of 1599200 and calculation is “3 million yen – 750,000 yen = 2,250,000 yen”.
This is income tax amount after donation deduction (In the case of tax credit)
Hometown tax payment (FurusatoNozei) and donation deduction of Japan
Assumed that you are living in Tokyo, Chuo ward, but you hope to pay income tax, resident tax to Miyazaki city, Miyazaki prefecture.
In that case you can use Hometown tax payment (Furusato Nozei) and you can use donation deduction in this process, too.
Furusato means Hometown and Nozei means Tax Payment. You can pay your tax to Miyazaki city, Miyazaki prefecture etc. (city where you are not living) and Miyazaki city, Miyazaki prefecture may present you a gift instead.
In the case of FurusatoNozei, you can reduce amount of resident tax, too.
As for Income tax and Furusato Nozei.
Amount of donation (tax payment to Miyazaki city) – 2000 yen * your income tax rate = Amount deducted from your income tax.
Assumed you donate 10000 yen to Miyazaki city, Miyazaki prefecture.
Your income tax rate is 20%
(Income tax rate differs depending on your taxable income)
In this case 10000 – 2000 * 20% = 1600 yen.
1600 yen is reimbursed from your income tax.
If you are salaried worker, you have already paid income tax by withholding tax. So 1600 yen is transferred to your bank account.
To make explanation simple, I omit Reconstruction special tax.
Income tax rate including Reconstruction special tax= Income tax rate * 1.021%.
So if income tax rate is 10%, Income tax rate including Reconstruction special tax is
10.1021% (=10 * 1.01021)
As for Resident tax and FurusatoNozei
(1) Amount of donation – 2000 yen * 10% = Amount deducted from your resident tax.
(2) Amount of donation – 2000 yen) * (100% – 10% – your income tax rate) = amount deducted from your resident tax.
Assumed you donate 10000 yen to Miyazaki city, Miyazaki prefecture.
Your income tax rate is 20%
(Income tax rate differs depending on your taxable income)
(10000 – 2000) * 10% = 800 yen.—–①
(10000 – 2000) * (100% – 10% – 20%) = 5600 yen.—–②
①+②＝6400 yen.
If you apply for donation deduction in 2020 March, your resident tax of 2021 is reduced by 6400 yen.
In the case of Furusatonozei, salaried employees can apply for donation deduction without tax filing.
But she can apply for Donation Deduction (Furusato Nozei) by using “One stop Tokurei Seido”.
In the case you use Furusto Nozei, amount of your tax is increased by 2000 yen though, Value of Gift from Donee (ex. Miyazaki city etc.) is often more than 2000 yen.
How to claim Donation Deduction
In order to claim Donation Deduction, you need to keep receipts and submit tax filing.
When you donate some money to CERTIFIED NPO (Normal NPO is not included), You will receive a receipt issued by CERTIFIED NPO etc.
And you can submit tax filing paper while 15th February to 15th March of the following year with the receipt.
