Foreign tax deduction:
Residents in Japan are taxed on all income regardless of whether the place where income occurred is domestic or foreign. As a result, it will be doubly taxed in Japan and abroad. A foreign tax credit is a system that allows you to deduct a fixed amount from income tax in Japan for income generated outside of the country to adjust its double taxation.
Calculation method of foreign tax deduction
(Deductible limit amount) = (amount of income tax for that year) × (total foreign income for that year / total income for that year)
The following items are not subject to foreign tax deductions;
– Those who pay the taxes can request the tax refund arbitrarily after payment
– Those who pay taxes can arbitrarily determine the period during which the payment is suspended
– Equivalent to incidental taxes such as additional taxes and delinquent taxes
– Taxable income arising from unnatural transactions that are not recognized as transactions in which notices such as structured transactions in financial transactions are made
– Taxable for capital etc. transactions such as repayment of investment
– for income generated during the nonresident period before that year
– Those that were deemed not to apply the foreign tax credit by the tax treaty
Carry-over deduction for foreign tax deductions:
The foreign tax credit deducts a fixed amount from the income tax amount for that year in the year when paying foreign income tax, but if the year when foreign income occurs and the year when foreign income tax will be paid will agree We can not. The difference between the amount of foreign income tax and the deductible limit can be carried over for the next three years from the following year in order to adjust the difference between the year of such foreign income generation and the year of payment of foreign income tax.