How to reduce taxes paid in Japan

Hello.  This is Yohji. In Japan, there is a system to reduce the amount of tax payment by donating to the local government.  It is a system called “hometown tax payment” (ふるさと納税 / ふるさとのうぜい).
I also made a donation for the first time last year and was able to reduce this year’s tax payments.
In this topic, I will tell you how to pay “hometown tax” for foreigners living in Japan. If you reading this topic, you too can minimize your tax payments next year.

What is hometown tax payment?

If you donate 2,000yen or more (Donate at least 3000 yen to receive the deduction) to the local government, the amount of residence tax paid for the following year can be reduced according to the amount of donation. 
* I will write another article about taxes that everyone has to pay when living in Japan.

Many Japanese people do not understand this system, and only about 8% of the Japanese people have been tax-reduced by using their hometown tax payment. However, even if you are a foreigner who has a resident card in Japan, I intend to write it so that you can understand the procedure by reading this topic, so please read to the end.

Benefit

There are two benefits to paying your hometown tax.

  1. Receive a gift from the local government of the donation destination according to the donation amount
  2. The residence tax for the year following the donation will be reduced

The actual amount of tax reduction that Yoji used to pay his hometown tax last year is posted at the end of the article.

Schedule

  • Donation … January-December
  • Tax reduction … Resident tax for the year following the donation

Procedure flow

There are three main stages. 
* The flow of this procedure is written assuming that you are an office worker.  Self-employed people need to final tax return, but many foreigners working in Japan are not self-employed, so I will omit it in this topic.

Check the maximum deduction amount
Donate to the local government
Make a deduction procedure

Check the maximum deduction amount

The maximum tax deduction amount depends on your family structure and annual income.  Find out your appropriate deduction amount in the table below.

※The amount obtained by subtracting 2000 yen from this amount can be saved from the residence tax for the following year.
※Annual income is the total amount of payment before various taxes are deducted.

ex.)
Case 1 : Single or married couple / Annual income 2,000,000 yen

Case 2 : Married couple and spouse deduction / Annual income 4,000,000 yen

You can donate up to the maximum donation amount by dividing it into multiple local governments (within 5) and gifts.
You can donate from a minimum of 3,000 yen, but you should donate up to the maximum amount to get as much deduction as possible.

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Donate to the local government

Hometown tax payment “au PAY ふるさと納税”

There are several services that can donate to local governments, but here I will explain using ” au PAY ふるさと納税 “, which has the largest number of users, as an example.

Registration

Access the “au PAY ふるさと納税” and tap login and register as a free member
Enter your email address and Enter the verification code written in the email you received
Proceed according to the required input items

Find the gift you want

* To simplify the procedure, please donate up to 5 local governments.

Search for and donate your desired items ①
Search for and donate your desired items

Receive gifts

Prepare for application

Preparation of required documents

Please fill in the necessary items on the donation receipt certificate(寄付金受領証明書 / きふきん じゅりょう しょうめいしょ) and the special application form(申告特例申請書 / しんこく とくれい しんせいしょ). Both documents have only Japanese forms, so here are some examples.

Documents required for application

The special application form and necessary documents will be mailed to the local government of the donation destination by January 10 of the following year.  (Must arrive)

  • Case 1
    A copy of the front and back of Individual number card
  • Case 2
    A copy of my number notification card or A copy of the resident’s card with Individual number
    +
    A copy of Japanese Driver’s license or A copy of passport

Example

 For the first time last year, I made a donation with “Hometown Tax Payment”.

  • Resident tax paid in 2020 … 311,800 yen ☹
  • Resident tax to be paid in 2021 … 259,800 yen
  • Tax reduction amount … 52,000 yen!

Know about the amount of money saved

The image below is a document called “Tax Payment Decision Notice”(納税決定通知書 / のうぜいけっていつうちしょ), which is mailed from the municipality every June.
The amount shown in “Tax Payment Decision Notice” in the green frame is the amount saved.



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Conclusion

It may be difficult to see the benefits because the timing of donation (selection of reward items) and the timing of tax reduction are different, but anyone can get a deduction for working for 2 to 4 days.  It may be difficult because only Japanese forms are available, but if you have any problems, please feel free to contact me in the Online Community “useJapan”.

 See you again!

Introduction and usage of the online community “useJapan”

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