Overview of Donation Deductions
Overview
The donation deduction is a system under the Japanese tax system that reduces tax payments by deducting the amount of donations made from income. The donation deduction was established to support public interest activities and applies to individuals and corporations. The donation deduction may be applied to income tax and resident tax. By taking advantage of the donation deduction, you can reduce your tax burden in recognition of your social contribution.
How Income Tax Donation Deductions Work
The income tax deduction for donations is a system that reduces the amount of tax due by deducting a portion of the donation from the amount of income. There is an upper limit to the amount of donation. The upper limit depends on your income.
If you wish to receive a donation deduction, you must indicate this on your tax return.
Deduction for donations for Japanese income tax purposes
What is deductible as a donation for Japanese income tax purposes?
Donations are made to the national government, local governments, and specified public interest promotion corporations.
- Public Interest Incorporated Associations, etc.: Donations to public interest incorporated associations and public interest incorporated foundations that meet specific criteria are eligible.
- Authorized and specially authorized NPOs: These are also eligible.
- Political organizations are covered under the system of special deduction for political party donations, which is a different legal framework.
- Donations not deductible: Direct contributions to individuals or organizations and donations made outside of Japan are not deductible.
More detailed information can be found on the IRS website or at the tax office.
When considering Wikipedia, certified and specially certified NPOs are likely eligible.
Public Interest Incorporated Associations, etc.
What is a Specified Public Interest Corporation?
They are defined as such.
Among public interest corporations, donations to certain corporations that significantly contribute to the promotion of public interest, such as the promotion of education or science, the enhancement of culture, and contributions to social welfare (“specified public interest corporations”), are related to the business that is the primary purpose of the specified public interest corporations, are subject to tax measures such as the donation deduction. The above “certain items” are as follows.
The above “certain entities” are the following corporations.
Independent administrative institutions
Local Incorporated Administrative Agencies primarily aim to perform a specific type of business.
The Japan Center for Automobile Safety and Driving, Japan Legal Support Center, Japan Private Schools Foundation, and Japanese Red Cross Society.
Public interest-incorporated associations and public interest-incorporated foundations
School corporations whose primary purpose is the establishment of schools, or the establishment of schools and special training schools or vocational schools, as provided for in Article 3 of the Private School Law, or corporations established under Article 64, Paragraph 4 of the Private School Law, whose primary purpose is the establishment of special training schools or vocational schools.
Social welfare corporations
Social welfare corporations(Note) The former corporations under Article 34 of the Civil Code, which were previously considered as specified public interest promotion corporations, are to be transferred to either public interest incorporated associations/foundations or general incorporated associations/foundations under the public interest corporation system reform, and the transition period expired as of November 30, 2013.
Ministry of Finance, “Specified Public Interest Promotion Corporations,” last confirmed on February 10, 2024.
Certified and Specially Certified NPOs
You can check if your organization is registered as a certified NPO here.
If you want a list, please click here for a PDF file.
Is it deductible for Japanese income tax purposes?
According to Japanese income tax law, donations are not deductible if they meet certain conditions.
For example, donations to certified public interest incorporated associations and specific public interest organizations in Japan are deductible for income tax purposes. However, since Wikipedia is not a public interest organization in Japan, donations are not deductible for income tax purposes. If you wish to receive a deduction for your donation, you must donate to a public interest organization in Japan.
Laws in the U.S. and Canada
In the U.S., donations to nonprofit organizations are deductible if certain conditions are met, but Wikipedia is a non-profit organization and, therefore, does not receive an income tax deduction. Similarly, in Canada, donations are deductible only to organizations of a public nature, but Wikipedia does not meet those conditions, so its contributions are not deductible for income tax purposes.
Wikimedia also explains.
United States
The Wikimedia Foundation nonprofit fits a charitable organization (Taxpayer Identification Number 20-0049703) established in the United States under Section 501(c)(3) of the U.S. Internal Revenue Code, so donations from individuals or organizations in the United States may be tax deductible. Scanned image of a letter of status under Section 501c(3) of the federal Internal Revenue Code
Canada
Because the Wikimedia Foundation is a Section 501(c)(3) organization under the U.S. Internal Revenue Code, Canadian tax law generally allows donations to the Wikimedia Foundation to be deductible only against U.S. taxable income. U.S.-Canada Tax Treaty. Article 21.6 may be helpful. For more information on the deductibility of such donations, please get in touch with your tax professional.
Other Countries
Because the Wikimedia Foundation inonprofitofit charitable organization established in the United States under Section 501 (c)(3) of the U.S. Internal Revenue Code, donations from individuals or organizations in the United States may be tax deductible. Donations from individuals or organizations outside the U.S. may not be tax deductible in the U.S. or other countries. In such cases, donors should seek local tax advice. It is important to note that Wikimedia does not seek to solicit donations from individuals or organizations in jurisdictions that prohibit or restrict fundraising by international charities, such as Wikimedia, or impose gift taxes on donations to international charities. Gift Aid in the U.K. (Gift Aid) Gift Aid in the UK does not apply to donations to the Wikimedia Foundation.
Wikimedia, “Tax Deductions,” last checked February 10, 2024.
Japanese income tax application needs to be considered.
To qualify for an income tax deduction for donations, you must meet the requirements under Japanese law. In contrast, contributions to Wikimedia are deductible, and the amount of the deduction applied may vary depending on the donor’s income tax status and other factors. It is important to seek individual tax advice when taking a donation deduction.
