All taxpayers in Japan pay residence tax (jumin-zei). The tax amount is defined as 10% of your prior year’s taxable income with 6% going to the prefecture and 4% the municipal in which you live. Furusato nozei (“hometown tax payment”) is technically a voluntary contribution to a prefecture or municipality of your choosing (despite the name, contributions do not have to be to your hometown).
Why would I make a voluntary contribution to a prefecture or municipality?
Well, under the scheme if your contribution is greater than ¥2,000 then you can claim up to 20% of your residence tax back (the actual amount depends on various factors such as salary, number of dependents, etc., which I’ll get to below). Essentially, you are deciding to which prefecture or municipality part of your residence tax gets paid. But the real advantage of furusato nozei is that in return for your contribution that particular region or town sends you a “gift” as a token of appreciation. Typically these gifts are high-quality food produce (rice, meat, vegetables, etc.) that the area produces, but some regions also offer travel coupons, vouchers for the onsen, and other gifts. For the government the scheme helps address the tax collection inequalities between the cities and regional towns (furusato nozei typically sees money transfer from the former to the latter).
Participating in this scheme used to mean that you had to file an income tax return to state that you have made a contribution (a nuisance for the majority who have taxes automatically deducted from their salary), but as of April 2015 a “one stop exemption” system was introduced whereby this filing is no longer required so long as you limit your contribution to no more than five areas.
All told, for a ¥2,000 upfront payment you receive something in exchange for pre-paying tax. What’s not to like?
So how do I make a contribution?
Your contribution is made by purchasing your “gifts” through websites dedicated to the furusato nozei scheme (basically online shopping). You can search or filter by region but for the vast majority of people the municipal or prefecture to which they contribute will be determined by the products on offer. Here are some of the websites through which you can order:
The total exemption amount is a combination of exemptions from both income tax and residence tax. But most people just want to know the maximum they can contribute before they have to pay more than the obligatory ¥2,000. Essentially, “how much can I get for free?”
As mentioned above, the exact calculation is impacted by salary, number of dependents (and their age), household loan amount, and so on and so forth. If you want to get the exact figure then you will need to look at your tax filing and input the figures into calculators such as this one (only in Japanese).
Otherwise the following table should give you some idea of how much you can spend (figures are approximate; 2015).
|Gross income||Single||Couple (1 child)||Couple (2 children)|
And how do I get the money back?
If you purchase products from over five different areas (and thus have to submit an income tax filing) then you will get the money back in two parts: (1) a smaller portion from the tax authorities into your designated bank account about 1-2 months after filing your tax return, (2) the remaining portion will be deducted from your residence tax bill from June of the following year.
For those people that can’t be bothered with the hassle of tax filings then so long as you limit yourself to selecting produce from no more than five areas you don’t need to do the filing but you will need to submit a related form to each of the areas from which you purchased goods (they will send you a hard-copy). Example form here. Under this “one stop exemption scheme” the exemption amount will simply reduce your following year’s residence tax bill.
Am I still eligible as a foreigner?
Yes, so long as you’re living and working in the country and thus have taxes from which you can receive an exemption.
Anything else I should know?
Well, the prices on the websites would have you balking if you saw them in your local supermarket, but the goods are essentially free after all so it’s difficult to complain (they are, after all, thank you gifts rather than goods in exchange for the contribution). Secondly, you’re not dealing with amazon here; these are local producers that cannot cope with large orders or, in some cases like fruit and vegetables, the produce might not even be ready to ship so be prepared to wait for up to a month to receive your gift.