Japanese tax code for charitable donations to nonprofit organizations
Tax merits for donors expanded; individuals who donate to nonprofits will receive a tax credit for up to 50% of their donation.
Criteria to become a “Certified NPO (Nintei)” became much easier.
All organizations should be certified under the new “3,000 yen x 100 people” rule! Let’s become a “Certified NPO (Nintei)”!
The new donation taxation system
Three big changes under the new system
1. Certified NPOs can now collect donations, easier.
(For donations collected after January 1st , 2011)
When individuals donate to a certified NPO:
Income tax (national tax) → Donations are deductible.
Residence tax (local tax) → Donations to certified NPOs specified in the local government ordinances are deductible.
A maximum 50% tax deduction = Tax reduction
(An elective system with the old method)
The National Tax Agency introduced an income tax deduction method. (The deductible amount is essentially the same regardless of income.) The deductible ratio is 40% of the donation (a maximum of 50% when including 10% residence tax).
i.e. (Donation – 2,000 yen) x 40% is deductible from income tax.
Regardless of income:
• a 10,000 yen donation means a 3,200 yen tax reduction!
• a 100,000 yen donation means a 39,200 yen tax reduction!
The donation deduction method was used for deducting donations from income tax. (The benefits were little for people on lower incomes.)
For example: The same 10,000 yen donation was a
• 800 yen tax reduction for someone with an income of 3 million yen
• 3,200 yen tax reduction for someone with an income of 20 million yen
2. Easier National Tax Agency Certification
(For applications submitted after June 30th, 2011)
The Public Support Test (PST) checks whether citizens widely support your organization. This was known as the largest barrier to becoming a certified NPO.
100 people or more donate more than 3,000 yen
(An elective system with the old method)
* This includes corporations and organizations, as well as individuals. Even low-return affiliate membership fees are classed as donations. But regular membership fees and directors’ donations by are not included.
Income from donations, etc. must be more than 20% of your ordinary revenue.
3. The Provisional Certification System will be introduced in April 2012.
(For applications submitted after April 1st, 2012)
You can receive provisional certification if you fulfill all conditions bar the PST. (Valid for 3 years. Approved once only.)
|Requirements||Satisfy all 8 criteria||Satisfy 7 criteria, except the PST|
|Validity||5 years from certification date||3 years from provisional certification date|
|Eligible Organizations||All NPOs (Note: The NPO must be in operation for more than 1 year.)||All NPOs * A provisional measure until March 2015 (Note: The NPO must be in operation for more than 1 year.)|
Eight criteria for becoming a Certified NPO
1. Pass the PST (Public Support Test)
2. Main activities are not for members only
3. Organization management is fair
4. Business activities fulfill the set criteria
5. Information disclosure is fair
6. Business reports and other documents are submitted to the local government authorities
7. No law violations
8. Established more than 1 year
Four advantages to become a “Certified NPO (Nintei)”
By donating to Certified NPOs,
1. individuals can deduct the donated amount.
2. corporations have increased deductible donations.
3. heirs are exempt from taxes on inherited property they donate.
4. the Certified NPO, itself, can use the deemed donation system.
Get Your Organization Certified, Now!
To become a certified NPO, it usually takes about 6 months, 2–3 months (at the earliest) after you apply.
Get detailed updated information from C’s.
C’s gives consultation to become a certified NPO.
Coalition for Legislation to Support Citizen’s Organizations (C’s)
Sanbancho TY Plaza 5F, 24-25 Sanbancho,
Chiyoda-ku, Tokyo, Japan 102-0075
Tel: 03-3221-7151/Fax: 03-3221-7152
Our advocacy work was made possible due to the C’s supporters. We extend our gratitude to all our members and donors.
This English translation was done by Mr. Phil Robertson. We express special thanks to him.