Furusato Nozei

Japan has this interesting tax refund system called the “Furusato Nozei”. Basically, when you pay taxes in Japan, they’re split into “national” and “resident” taxes, and the resident taxes are paid towards the prefecture you live in. Since so many people live in Tokyo, the Furusato Nozei system lets you “donate” part of your taxes to another prefecture. In return, the prefecture you choose to donate your taxes to will give you gift.

In practice it’s all set up so that you can essentially shop for goods on a storefront - the only catch is that the prefecture can only give you a gift that’s up to 30% of the value of your donation. So you pay 10,000 yen and you’ll get food items worth about 3,000 yen in return.

Still, it’s a pretty cool way to buy some extra rice, or to spend 10,000 yen buying some fancy shine muscat grapes. Guilt-free, since you know it’s just coming out of your taxes anyway.

I was kind of curious to do the math on it:

• Somewhere in the 3 - 4 million yen range is the average salary in Japan
• But let’s say you made 5 million yen a year ($50,000 AUD / $32,000 USD). At that level you’d pay 23% of your income (1.12 million) in taxes.
• And from that, you can “buy” 63,000 yen worth of goods through the Furusato Nozei system
• Which comes out to about 20,000 yen for the actual value of the goods (taking into account it’s capped at 30%)
• So you would be getting 1.7% of your taxes back in food items.

Note that the average wage might seem shockingly low compared to Australia/America, but the cost of living is a fair bit lower here as well, so it all works out.

If you are a resident in Japan, I would recommend doing your furusato nozei each year if you are not already! I skipped it on my first year or two since it seemed like a hassle, but it’s basically free money so it’s worth doing. You can easily do it through Rakuten. You pay for the goods upfront, but then that’s deducted out of the taxes you’d have to pay in your next tax return. As long as you limit your purchases to a max of 5 different locations, there’s a “one-stop” system which automatically deals with the tax stuff (beyond 5 locations you have to manually do a tax return I think).