Residents of Japan generally report foreign income in Japan too. The figures on your foreign tax return cannot be used as they are; they must be recalculated under Japanese tax rules.
We can help if you
- own a house or apartment abroad that you rent out
- trade shares or ETFs or receive dividends through a foreign broker
- surrendered or matured an overseas life insurance or annuity policy
- did not report foreign income in past years
Overseas rental property
- Depreciation is recalculated under Japanese rules. Useful lives depend on the building's structure and age and differ from those used abroad. Land and building values are also separated.
- Losses on used foreign buildings are limited. Losses arising from depreciation calculated with shortened useful lives for used buildings are disregarded and cannot be offset against salary or other income (from 2021).
- Rent and expenses are generally converted at the TTM rate on the transaction date. The purchase price is converted once, at the rate on the purchase date.
- We check whether overseas expenses such as property tax, HOA fees and management fees are deductible in Japan.
Foreign brokerage accounts
- Gains and dividends on shares listed on foreign exchanges are taxed separately at 20.315%, like Japanese listed shares.
- Purchase and sale prices are converted at the rate on each transaction date. Currency gains and losses are included in the gain.
- Losses on shares sold through a foreign broker may not be carried forward to later years, unlike losses at Japanese brokers.
- Tax withheld abroad can be claimed as a foreign tax credit.
Overseas life insurance
The tax on payouts depends on who paid the premiums, who is insured and who receives the money.
| Payout | Combination | Tax |
|---|---|---|
| Death benefit | The premium payer dies and someone else receives it | Inheritance tax |
| The premium payer receives it | Income tax (occasional income) | |
| Someone other than the premium payer (and the deceased) receives it | Gift tax | |
| Surrender or maturity | The premium payer receives it | Income tax (occasional income; miscellaneous income if paid as an annuity) |
| Someone else receives it | Gift tax |
Products that are mainly investments with little real insurance element may not be treated as insurance.
How we help
- Review documentsWe review your foreign returns, purchase contracts, account statements and policy documents.
- Recalculate under Japanese rulesWe redo depreciation, currency conversion and expense classification.
- File your returnWe prepare your Japanese return with the foreign tax credit, including returns for past years.
We do not prepare US returns (Form 1040, Schedule E, FBAR). We work alongside US professionals where needed.
FAQ
Can losses on my overseas property be offset against my salary?
Sometimes, for new buildings or where statutory useful lives are used. For used buildings depreciated over shortened lives, the part of the loss arising from depreciation cannot be offset. It depends on when you bought the property and its condition.
How many past years do I need to file for?
It depends on your situation, but generally the past five years are relevant. We will suggest how far back to go after reviewing your case.
This page provides general information only. The actual treatment depends on your individual circumstances. Please consult a professional before making decisions.