Furusato Nozei: How to Use the One-Stop Exception System for Company Employees
Losing some of your income to taxes is unavoidable. However, Japan’s Furusato Nozei(ふるさと納税) program allows taxpaying residents an option to prepay some of their income taxes in exchange for specialty goods.
In English, it's referred to as Japan's hometown tax program. With it, you can use the system to deduct from taxes due and receive some high-end regional gifts in return.
In this article, we focus on how the One-Stop Exception System (ワンストップ特例制度) works for company employees, as well as provide an overall look at the benefits and inner workings of this tax program.
How does Furusato Nozei work?
Furusato Nozei is a program that lets taxpayers prepay a portion of their taxes by donating to various cities through donations. This system was first introduced in 2008 to help revitalize regions with declining populations struggling with a lack of tax revenue.
By donating to a city, town, or village of your choice, the area can use the funds for public services or disaster relief. In exchange, you receive a gift worth 30% of your paid donation and a reduced tax bill in the coming year.
If you want to participate in the Furusato Nozei program, you should know that there's a limit to how much you can donate. The limit is determined based on your income and family structure. There is also a ¥2000 non-deductible yearly fee to participate.
An overview of the steps to take to use the hometown tax system are as follows:
Calculate how much you can contribute to the hometown tax system.
Donate and receive your gift.
Receive a certificate of donation.
File your tax return or apply for the One-Stop Exception System.
Rejoice over your reduced tax bill in the coming year.
We’ll dive into the steps in detail, but first…
What are the benefits of using Japan’s hometown tax program?
Furusato Nozei offers the following benefits for people using the program:
You can deduct donation amounts exceeding ¥2,000 from your taxes. For example, if you contribute ¥30,000 to Furusato Nozei, ¥28,000 will be deducted from your income and residency tax the following year.
You can receive luxury gifts
Aside from tax deductions, you will also receive a gift in return. Popular gifts include seasonal fruits, vegetables, travel vouchers, wagyu beef, and other local specialties.
You can choose the municipality you want to support
With Furusato Nozei, you can help an area hit by an earthquake or a place you used to live that was memorable. However, you can't donate to the region where you currently live.
You can select the purpose of your donation
Certain municipalities allow you to choose where your money will go. Examples include healthcare, preserving nature, and disaster relief, which you can select when donating.
What is the One-Stop Exception System for company employees?
The One-Stop Exception System for Furusato Nozei allows company employees to receive tax deductions without filing a yearly tax return (確定申告 = kakutei shinkoku). This system was introduced in 2015 to encourage more people to utilize the hometown tax program.
You can apply for the One-Stop Exception System if the following conditions apply to you:
You are a company employee and don’t need to file taxes.
You plan on donating to 5 or fewer municipalities in a year.
For example, suppose you are a salaried employee, and your company withholds taxes from your paycheck. In that case, you can apply for the One-Stop Exception System and receive resident tax deductions from June the following year.
How to use the One-Stop Exception System for Furusato Nozei
Step 1. Calculate how much you can donate.
You can use online Furusato Nozei calculators such as Furusato Tax. The website is in Japanese, but a browser translator can help you translate the page.
Step 2. Choose a site to make your donation.
Portal sites like Furunavi or Satofull can make this process easy. These sites have an extensive list of participating municipalities and gift options, making the experience feel more like shopping than donating.
Step 3. Create an account and pick an area to send your donation.
Once you've decided on a site, make an account using the exact name and address as indicated on your ID, and start looking for a city to contribute to—or the type of things you want to receive. Donate by December 31st, which is the deadline for sending your application.
Step 4. Receive your proof of donation and One-Stop application form (寄附金税額控除に係る申告特例申請書 = kifu kin zeigaku kōjo ni kakaru shinkoku tokurei shinsei sho).
After processing your donation (2-3 weeks), the city you donated to will send you a certificate listing the amount you contributed. Additionally, they will send you an application form for the One-Stop Exception System. If you are a salaried employee, this form allows you to skip filing a year-end tax return to offset next year's taxes.
Step 5. Fill out the application form.
Image. One-Stop application form from the Ministry of Internal Affairs.
Here's how to fill out the form.
In the top left box, write the date you are filling in the application and the name of the municipality receiving your donation.
Fill in your address, name, gender, phone number, My Number information, and date of birth.
Write the date you donated and the amount.
If you are a salaried employee and do not have to file your taxes, check the first box.
Check the second box if you have donated to less than five municipalities.
Write your address and name again in the last box but ignore the square on the right. That's for the municipality to stamp and send back to you to let you know they processed your request.
Step 6. Mail the completed form and a photocopy of your My Number card to the municipality where you donated.
You can find the mailing address for the municipality on the envelope they used to send you the One-Stop application form.
Step 7. Receive your gift!
The city you donated to will send your gift after processing your payment.
Step 8. Confirm your tax deduction.
Company employees receive a Notice of Resident Tax (住民税確定通知書 = jyumin zei kakutei tsuchi sho) from their employer in June every year. You can confirm the amount of your tax deduction from Furusato Nozei by checking the tax exemption column (税額控除額) on the notice.
Note: your tax deduction is reflected the year following your donation. For example, if you used Furusato Nozei in 2022 and applied for the One-Stop Exception System, your tax deduction will show up on tax papers you will receive in June 2023.
Furusato nozei (ふるさと納税): How to use the hometown tax payment system in Japan(2020) The best deal, by How to Live in Japan
Things to keep in mind when using the One-Stop Exception System
To ensure your application goes through without any problems, here are a few things to remember when using the One-Stop Exception System.
You must mail an application for each donation. For example, if you donate twice to the same municipality, you will need to post a total of two application forms. If you don't send an application for each donation, you will not be eligible for a tax deduction.
You cannot deduct medical or first-year mortgage expenses with the One-Stop Exception System. If you want to apply those tax deductions to next year's taxes, you must file an income tax return.
The One-Stop Exception System application will become invalid if you file an income tax return. If you file an income tax return, use your tax return form to list your Furusato Nozei contributions.
Applications for the One-Stop Exception System must arrive by January 10th of the following year. If you miss this deadline, you must instead file your tax return to receive your tax deduction.
You cannot use the One-Stop Exception System if you've made more than five donations through Furusato Nozei.
No one likes paying taxes, but the One-Stop Exception System for Furusato Nozei gives company employees a way to deduct next year’s taxes while also receiving goods in return. Although the process may confuse first-time users, portal sites help streamline the experience.
For more information about Furusato Nozei and the One-Stop Exception System, this FAQ page from the Ministry of Internal Affairs and Communication offers extra insight into the program.
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