1. Introduction
As with the original hometown tax system in which individuals can donate money to prefectures and municipalities they want to support, the corporate version of hometown tax was established in fiscal 2016 aiming at supporting local governments with insufficient tax revenues due to depopulation. The individual version of hometown tax has been quite popular since the start, but it is pointed out that the corporate version has yet to fully prevail. In this News, we will introduce the corporate version of hometown tax, focusing on the 2020 tax reform.
2. Corporate Version of Hometown Tax
The corporate version of hometown tax is formally called the “Regional Revitalization Taxation.” By making donations to the business projects appointed by the Prime Minister of Japan under the Regional Revitalization Plans, companies are eligible for the tax credit amounting to 60% of the donations. Compared with the tax program for individuals, there are some restrictions in the corporate version. For instance, municipalities and prefectures which do not receive local allocation tax are excluded from the donation program, and companies cannot donate local governments in which the head office is located. In addition, local governments are not permitted to give reward gifts in return for donations. On the other hand, making donations to the business projects conducted by local governments can improve the company’s brand image and contribute to its public relations activities. The minimum amount that are requested for one donation is 100,000 yen.
3. 2020 Tax reform
Under the tax reform for 2020, the corporate version of hometown tax was revised as follows.
① The special tax measure for the tax credit was extended to five years. (1 April 2020 ～ 31 March 2025)
② The tax credit ratio is raised from 30% to 60%. The total deduction ratio is raised to 90% together with the former rule of tax deductible expenses.
③ The donation paid before the local government launches the project is also applicable. (The timing of donation is more flexible.)
4. Conclusion
In this News, we mentioned “Corporate Version of Hometown Tax -2020 Tax Reform-.” Local prefectures and municipalities conducting local revitalization business appointed by the government is found on the “Corporate Version of Hometown Tax Portal Site” below. Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(References)
National Tax Agency: 2020 Tax Reform (Japanese)
Cabinet Office: Local Revitalization Activation Office Corporate Version of Hometown Tax Portal Site (Japanese)
Query on the phone+81-3-6821-9455