the Law to Promote Specified Nonprofit Activities (NPO Law)

When discussing NPOs in Japan today, it is helpful to understand the so-called NPO Law, the Law to Promote Specified Nonprofit Activities, enacted in March 1998. The process of the bill's passage through the Diet can be regarded as historic.

Under the NPO Law, NPOs can be incorporated without the approval process, and the governor of the prefecture where the NPOs are located (or the Cabinet Office in the case of NPOs with offices in at least two prefectures) is required to authenticate establishment of such organizations if they conform with the provisions set forth.

More than 6,000 NPOs incorporated as Specified Nonprofit Corporation since 1998, which dramatically changed the landscape of Japan's civil society.

Tax-exemption and Approved Specified Nonprofit Corporations

Currently in Japan NPOs incorporated under the NPO Law (Specified Nonprofit Organizations) do not have tax-exempt status. However, a new tax legislation was enforced in October 2001 as the first legislation to address the eligibility of Specified Nonprofit Organizations to receive tax-deductible donations.

Under this law, donors may claim tax write-offs for contributions made to an Approved Specified Nonprofit Corporation. Unfortunately the conditions which NPOs must satisfy according to this law are very strict, only 5 incorporated NPOs were approved during the past 6 months.