Changing the Japanese NPO Tax Law

 The Japanese Cabinet approved by Prime Minister Naoto Kan adopted a set of tax reforms for fiscal 2011 on Dec 16th 2010.What will the changes be?

If the bill is approved, NPOs will be able to claim 50% tax back from donations. The present “Nintei NPO” system allows “deduction from income”. With the new system, donors would be able to choose either “tax deduction” or “deduction from income”. Almost 50% of tax can be reclaimed, which gives more incentive to donors.

There are other benefits to becoming a Nintei NPO. For example, a donor with salary 5M yen, donates 50 thousand yen to Nintei NPO,

Present system: (¥50,000 – 2,000) X 10% = ¥4,800 can be deducted.

New system: (¥50,000 – 2,000) X 50% = ¥24,000 can be deducted.

Under the new system, if 100 people donate 3,000 yen each to an NPO, the NPO can become a Nintei NPO.

If the budget is approved, the new system will be more effective for NPOs. However, the parties are at odds, so the situation is unclear and it remains to be seen whether the budget will be approved.

Ayumi Suzuki
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