Preferential Tax Treatment of Donations Expanded for Certified NPOs

The Upper House Plenary Session on June 22, 2011, majority approved a tax revision law that includes measures to expand preferential tax treatment for donations to certified nonprofit organizations (NPOs).

The preferential tax system is a tax credit on personal donations that is calculated as follows: a sum of 2,000 yen (about US$25) is deducted from the donation, as is done presently; 40 percent of the reduced donation amount is deducted from one's income tax bill; similarly, 10 percent is deducted from the residential tax bill in municipalities with such provisions. These credits require a final income tax return to be filed at a tax office. The upper limit of the return is 25 percent of the income tax bill. This preferential tax system is applied to donations made in and after January 2011.

As of July 2011, 223 of the existing 43,000 NPOs in Japan are certified NPOs. The revised NPO law, which passed on June 15, 2011, just prior to the tax revision law enactment on June 22, 2011, made it easier for NPOs to obtain certification.

The tax revision law of June 22, 2011, added activities in three new fields including "activities for developing agricultural, mountainous, fishery, and hilly areas," simplified the certification process, and transferred responsibility for certifying NPOs from the Cabinet Bureau to the 47 prefectures. The law also added alternative criteria for certification: NPOs that receive a donation of 3,000 yen (about US$37) or more from at least 100 individuals.

The June 22 law was designed to help certified NPOs secure funds for carrying out fuller activities to support areas hit by the March 11 disaster.

Posted: 2011/10/15 06:00:15 AM