Selling Overseas Property While Living in Japan: Yen Conversion and the Foreign Tax Credit

Japan taxes the gain even if you paid tax abroad

A resident of Japan is taxed on a gain from overseas property in the same way as a gain on Japanese property. There is no separate method for overseas property. Paying tax abroad does not remove the need to report the sale in Japan.

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

Convert the purchase and the sale into yen separately

In principle, you convert each amount at the TTM rate on its own transaction date. TTM is the midpoint between a bank's selling rate (TTS) and its buying rate (TTB).

The word "immediately" matters. These exceptions do not fit money left in a foreign account.

Your gain in yen can be far from your gain in dollars

The gain you report is the difference in yen, not the gain in your local currency. Elena lives in Tokyo and is a resident of Japan. She bought an apartment abroad for US$500,000 at ¥110 to the dollar. She later sold it for US$550,000 at ¥150.

At the long-term rate of 20.315%, the tax on ¥27,500,000 is ¥5,586,625. If Elena had expected tax on only US$50,000 at ¥150, or ¥7,500,000, she would have planned for ¥1,523,625. The gap is ¥4,063,000.

This is only a simplified estimate, based on these assumptions: no buying or selling costs, no wear on the building and no special deductions. The 20.315% includes resident tax (juminzei) and surtax. It applies if you owned the property for more than five years on January 1 of the year of sale. Otherwise the rate is 39.63%.

The foreign tax credit has a limit

Tax paid abroad is credited only up to a limit, so part of it may not be credited. The income tax limit is your Japanese income tax × (adjusted foreign income ÷ total income for the year).

Suppose Elena also has other income of ¥5,500,000, so her total income is ¥33,000,000. If her income tax is assumed to be ¥4,800,000, the limit is ¥4,800,000 × ¥27,500,000 ÷ ¥33,000,000 = ¥4,000,000.

Foreign tax above that limit may be credited against surtax and resident tax, up to their own limits. Carryover rules for three years can also apply.

Some foreign taxes do not qualify:

• Tax you can choose to have refunded, or whose payment you can choose to defer
• Penalty-type charges added to the tax
• Tax above the limit set by a tax treaty
• Tax on income that arose while you were a non-resident of Japan

To claim the credit, you attach documents to your return, including a credit statement and proof of the foreign tax. Ask for the proof as soon as you sell.

Selling property abroad from Japan is the reverse of selling Japanese property from abroad

These two cases run in opposite directions, and the issues differ. If you live abroad and sell in Japan, see selling Japanese property as a non-resident.

Common mistakes

• Skipping the return after a local-currency loss. If Elena sold for US$480,000, she would lose US$20,000. In yen she would still gain ¥17,000,000, with tax of about ¥3,453,550.
• Claiming the credit in the wrong year. The credit generally belongs to the year the foreign tax is fixed, for example by your foreign return or a tax assessment. That may differ from the year of sale. A carryover also needs a credit statement for each year.
• Forgetting past depreciation on a rented property. You reduce the building's cost by each year's depreciation, even for years you did not claim it. A separate rule applies if the limit on losses from used overseas buildings affected you.

What you can do yourself, and where you need help

You can collect the contracts and foreign tax documents, and confirm the purchase and sale dates yourself. The rates, your cost and the credit depend on what those documents say. These points depend on your facts:

• Whether a special deduction, such as the ¥30 million home deduction, can apply
• How remittance rules affect a non-permanent resident
• How to treat a property you rented out

What changes when a tax accountant handles it

• We convert each amount at the rate for its date, using your documents.
• We calculate your cost, including wear on the building.
• We work out the credit limit, decide the year of the credit and prepare the statement.
• 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 your foreign return. See our fees for a Japanese return with a property sale.

Frequently asked questions

This article is general information based on rules in force as of November 6, 2026. It is not advice for your situation. It does not cover each country's tax rules or individual treaty terms. If the English and Japanese differ, the Japanese original applies.