The Foreign Tax Credit in Japan: How to Avoid Paying Twice

Updated November 9, 2026 · By Yuma Komatsu, CPA and licensed tax accountant

The short answer

If you are a tax resident of Japan, Japan generally taxes your income from abroad, even if another country has already taxed it. The foreign tax credit lets you subtract that foreign tax from your Japanese tax, up to a limit. It is not automatic: you claim it on a final tax return (kakutei shinkoku), with documents attached.

Why the same income can be taxed twice

Low-rise apartment buildings with wooden balconies along a quiet, tree-lined street in the late afternoon sun — Rent from an apartment abroad can be taxed where the apartment is, and in Japan.

A resident of Japan is generally taxed on income from anywhere in the world, and the country where the income arises may tax it too. The foreign tax credit lets you subtract the foreign tax from your Japanese tax.

Examples include rent from property abroad, dividends from foreign companies, interest on bank deposits abroad, and pay for work done abroad. For a property sale, see selling overseas property while living in Japan.

You are a resident if you have a domicile in Japan, or have lived here continuously for one year or more.

Non-permanent residents

A non-permanent resident is a tax status. It is separate from the immigration status of permanent resident. It covers residents without Japanese nationality who have lived in Japan for a total of five years or less in the past ten years.

Japan generally taxes their foreign income only if it is paid in Japan or remitted to Japan. Gains on some foreign shares are an exception. Only that part counts as foreign income for the credit. See your tax status in Japan.

Non-residents can use a credit only for income attributable to a permanent establishment (a business base) in Japan. This guide is for residents.

How the credit works for a resident

1. Report the income. Include your foreign income on your Japanese return, in yen.
2. Work out Japanese tax. Calculate your income tax for the year on all your income.
3. Subtract the foreign tax. You subtract it from income tax, up to a limit.
4. Use any excess. It goes against the surtax (special income tax for reconstruction), then resident tax (juminzei), each up to its own limit. From tax year 2027, the surtax is split into two parts, each with its own limit. The rest can be carried forward for up to three years.

The credit is capped at the Japanese tax on your foreign income

You can credit foreign tax only up to the part of your Japanese tax that relates to your foreign income. The limit for income tax is:

Income tax for the year (after other tax credits) × (foreign income ÷ total income)

Foreign income here is your income from abroad, worked out under Japanese rules. It can differ from the figure on your foreign return.

David has lived in Japan for eight years, so he is a resident but not a non-permanent resident. His total income for 2026 is ¥10,000,000. Of this, ¥2,000,000 is net rent from his apartment abroad.

Assume his Japanese income tax before the credit is ¥1,000,000. The other country charged ¥300,000 of tax on the rent, and that tax became payable in 2026.

Where David's ¥300,000 of foreign tax goes

Step	Limit	Amount
1. Income tax	¥1,000,000 × ¥2,000,000 ÷ ¥10,000,000 = ¥200,000	¥200,000
2. Surtax (2.1% of ¥1,000,000 = ¥21,000)	¥21,000 × ¥2,000,000 ÷ ¥10,000,000 = ¥4,200	¥4,200
3. Resident tax	30% × ¥200,000 = ¥60,000	¥60,000
4. Carried forward	Up to three years	¥35,800
Total		¥300,000

This is only a simplified estimate, based on the assumptions above. Step 2 uses the 2026 rate. From tax year 2027, the surtax is a 1.1% reconstruction surtax plus a new 1% defense surtax. Step 3 assumes David's resident tax is large enough to absorb ¥60,000.

Of the ¥300,000, ¥264,200 is credited against tax on his 2026 income.

A carryover also works the other way. If your foreign tax is below the limit, the unused limit can be carried forward for up to three years.

Some foreign tax does not qualify

Some foreign taxes do not count toward the credit, even if you paid them. They include:

Tax above the rate a tax treaty allows, or tax that the treaty exempts
Tax on income that arose while you were a non-resident of Japan
Tax on dividends in a NISA account, Japan's tax-exempt investment account
Tax that you can choose to have refunded after paying it, or whose payment you can put off as you choose
Penalties, late-payment interest and similar charges added to a tax

Three men in business clothes talking over coffee at a table by a large window in a city office — If you moved to Japan for work, tax on income from before you became a resident does not qualify.

The year of the credit follows the foreign tax, not the income

You generally claim the credit for the year the foreign tax becomes payable, not the year you earned the income. A foreign tax becomes payable when it is fixed, for example by your foreign return or a tax assessment.

You may instead use the year you actually pay it, if you do so consistently.

Rent earned in 2026, with the foreign tax fixed in 2027

Japanese return for 2026

Report the 2026 rent
No credit yet, because the foreign tax is not fixed
Attach the statement to keep the unused limit

Japanese return for 2027

The foreign return you file in 2027 fixes the tax
Claim the credit here
If the 2027 limit is not enough, use the unused 2026 limit

Claim it on your return, with proof attached

The credit applies only if you attach the required documents to your return. It is not part of your employer's year-end adjustment (nenmatsu chosei).

The Detailed Statement for Foreign Tax Credit (for Residents)
Proof of the foreign tax, such as a copy of your foreign return, a withholding statement or a tax payment certificate
A note of each tax's name, amount, dates and country, and why it qualifies
How you calculated your foreign income

A woman at a desk with a laptop, notebooks and a mug, looking out of a window onto a residential street — Ask for proof of the foreign tax as soon as it is fixed.

The credit is generally limited to the amounts you enter on the statement.

If you claim the credit for a year, you cannot deduct that year's qualifying foreign tax as an expense. This applies to all of it, including the part above the limit.

Common mistakes

Skipping the Japanese return because you paid tax abroad. The credit is given only on a return. See who must file in Japan.
Claiming the credit for the year you earned the income. It generally follows the year the foreign tax is fixed.
Breaking the chain of statements. A carryover works only if your return for each year, from the oldest year on, includes the statement. This applies even to a year with nothing to credit.

What you can do yourself, and where you need help

You can collect the documents and dates yourself: your foreign return or assessment, withholding statements, proof of payment, and the dates you lived in Japan. These points need judgment for your facts:

Whether each foreign tax qualifies, including any treaty cap
Your foreign income under Japanese rules, and each year's limit
Carryovers, and remittances if you are a non-permanent resident

What changes when a tax accountant handles it

We work out your foreign income under Japanese rules, and each limit.
We check which foreign taxes qualify and the year each one belongs to.
We prepare the statement each year and track carryovers.
We send an English summary before filing and file after you approve it.

We handle Japanese tax for individuals only, by email, with no calls. We do not prepare foreign tax returns. See how our service works and our fees.

Frequently asked questions

I paid tax abroad. Do I still need to file in Japan?

Paying tax abroad does not, by itself, remove a Japanese filing duty. If you are a resident of Japan, Japan generally taxes your income from abroad too. The credit is given only on a return.

Can I credit all the tax I paid abroad?

Not always. The credit is capped at the Japanese tax on your foreign income, and some foreign taxes do not qualify. Amounts above the limits may be carried forward for up to three years.

Which year do I claim the credit in?

Generally, the year the foreign tax becomes payable, for example when your foreign return or a tax assessment fixes it. You may instead use the year you actually pay it, if you do so consistently.

I forgot to claim the credit. Can I still claim it?

You may be able to claim it through a request for correction (kosei no seikyu), with the required documents. The time limit is generally five years from the filing deadline. For a refund-only return, it is five years from the date you filed it.

Yuma Komatsu, CPA and licensed tax accountant

Paid tax abroad on income Japan also taxes?

Yuma Komatsu is a Japanese CPA and licensed tax accountant. We prepare, sign and file your return. We work by email in written English. Our tax accountant does not speak English, and we do not offer calls.

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Sources

This article is general information based on rules in force as of November 9, 2026. It is not advice for your situation. It does not cover other countries' tax rules or individual treaty terms.