Non-Japanese Charitable Organizations Not Eligible for Donation Deduction of Japanese Income Tax

The culture of giving exists everywhere.
Donations are often made with policy objectives in mind and are structured to provide tax benefits.

However, when applying this donation deduction under Japan’s Income Tax Act, you must verify that you have actually made a donation to the eligible organization.

For people with Japanese nationality, this might not be something to worry about too much.
However, it’s a point that often trips up non-Japanese nationals. Let’s be careful.

The Legal Framework for Donation Deductions

Let’s take a look at the basic provisions regarding charitable donation deductions.

Article 78
(1)If, in any year, a Resident makes a specified donation and the amount set forth in item (i) exceeds the amount set forth in item (ii), the amount by which the former exceeds the latter is allowed as a deduction from the Resident’s gross income, retirement income or timber income for the year:

In other words, if the donation qualifies as a specified donation, you are eligible for a donation deduction.

What are designated donations? “Specified donations” refer to donations made to the national government, local governments, or corporations with a high public interest that meet certain requirements under the Japanese Acts. Among individual donations, those recognized as used for purposes that particularly benefit the public are eligible, and a portion of the donation can be deducted from taxable income.

Types of Eligible Donations

Legally, there are primarily four categories of specified donations (Article 78 of the Income Tax Act; Articles 215–217-2 of the Enforcement Order).

1. Donations to the national government or local governments
   Examples: Donations to the national government or local governments for disaster relief, and the “Furusato Nozei” program.
   However, this excludes cases where the donor receives a special benefit (such as exclusive use of facilities) in return.
2. Donations to public interest corporations and organizations designated by the Minister of Finance
   Public interest incorporated associations, public interest incorporated foundations, and other entities that meet the following requirements:
   • The solicitation of donations is directed at the “general public.”
   • The funds must be used to promote the public interest in areas such as education, science, culture, and social welfare, and must be allocated to urgent expenditures.
     Organizations that receive this designation are listed in a public notice as “Donations specified by the Minister of Finance” (e.g., disaster relief donations to the Japanese Red Cross Society).
3. Donations to public interest corporations established under specific laws
   Examples: Japan Broadcasting Corporation (NHK), Japan Student Services Organization, National University Corporations, etc.
   Among these corporations, the ones designated by cabinet order as making a significant contribution to the promotion of public welfare—such as the advancement of education, science, culture, and social welfare—are eligible.
4. Donations to a specified Public Interest Trust
   This also includes “public benefit trusts,” in which the trust property is used for public benefit purposes (such as education, culture, and social welfare) and is not returned to the settlor upon termination of the trust.
   Examples include the “Fund for the Promotion of Educational Research” and the “Fund for the Development of Local Culture.”

Qualified Organizations

Just because you made a donation to a charity on a whim doesn’t mean it counts as a donation.
That’s because this approach has actually been commonly used for tax avoidance.

If people set up bogus charities and are able to claim tax deductions for donations made to them, it becomes easier to evade taxes.
This is especially true if the donor controls the charity.

Therefore, it is necessary to obtain designation by the Minister of Finance or make a donation to a public interest corporation.

Public interest corporations are defined under Japanese law, and organizations based outside Japan generally do not qualify, even if they meet the criteria in substance.

Calculation of the Limit

When an individual makes a specific donation, they are eligible for an income tax deduction under the “donation deduction” provision, calculated using the following formula.

Deduction amount = (Total amount of specified donations – JPY2,000)

However, there is a cap on the total amount of eligible donations that can be deducted.
The limit is 40% of your total income.

Eligible donation amount = the lesser of (the total amount of specified donations made, or 40% of total income, etc.)

Examples

Example: A person with a total income of JPY6 million who donates JPY100,000 as a designated donation to the Japanese Red Cross Society

• Limit: JPY6 million yen × 40% = 2.4 million yen (below the cap)
• Deduction amount: (JPY100,000 – JPY2,000) = JPY98,000
  → For income tax purposes, you can deduct JPY98,000 from your taxable income.

Points to Note

• “Furusato Nozei(Hometown Tax Donations)” also falls under this category of designated donations, but a separate preferential tax system based on “tax credits” has been established.
• Donations related to admissions or transfers are also not eligible.
• To apply the deduction, you must attach receipts or proof of payment. In the case of a specified public interest trust, you must also attach supporting documents.

In summary

Non-Japanese people have also made generous donations.
When preparing tax returns, people often ask whether they are eligible for certain deductions, but in reality, most of them do not qualify.
If you focus primarily on the donation itself, whether or not it qualifies for a tax deduction may not be the most important consideration.

However, when filing your tax return, please keep in mind that donations to foreign organizations are unlikely to qualify for the charitable donation deduction.