Nonprofit organizations play important roles in such areas as education, social welfare, public health and medical services and environmental protection in communities; after the 3/11 earthquake and tsunami, they have also been active in disaster relief efforts.
A revised NPO law went into force on April 1. The crux of the revision is loosen conditions for awarding tax privileges to NPOs, thus creating incentives for ordinary citizens to make donations.
When the NPO law was revised in June 2011, the tax law was also revised and its revision went into effect at that time to help increase donations to NPOs through a tax reform.
As of April 16, only 249 of some 45,000 certified NPOs in Japan enjoyed the tax privilege. It is hoped that the new system will help strengthen the financial condition of NPOs and expand their activities in communities.
From now on, if an NPO has 100 or more citizens a year on average who donate annually ¥3,000 or more to the organization, the NPO is eligible to receive the tax privilege under which those citizens who make donations can deduct 50 percent of the donated amount from the income tax he or she pays.
The new tax privilege is easier to qualify for than the previous requirement that required NPOs to receive 20 percent or more of their total revenues in donations before they qualified.
Under the revised system, even if they fail to meet the 20 percent rule, NPOs that have existed for less than five years can receive a provisional tax privilege that lasts three years if they meet certain conditions in their activities, financial conditions and information disclosure.
By using the three-year privilege period, they can expand their activities to collect donations from more than 100 citizens and get the permanent tax privilege.
In Japan, donations by individuals and businesses amount to about ¥1 trillion yearly, much lower than in other developed nations. It is hoped that the new system will encourage more Japanese to donate to NPOs.
Also under the revision, prefectural governments and ordinance-designated major cities, instead of the Cabinet Office and the National Tax Agency, will handle NPO applications.
That should make it easier for NPOs and local governments to better cooperate. It is hoped that the new system will encourage more citizen involvement with NPOs, which are more flexible than bureaucratic governments, and to help promote more NPO participation in community-oriented activities.