Foreign Tax Credit Simulator for Inheritance Tax | Ease Double Taxation on Overseas Assets
Enter the total estate value, the statutory heir composition, the value of the overseas property, and the tax charged abroad to estimate the foreign tax credit under Article 20-2 of Japan's Inheritance Tax Act and the tax owed after the credit is applied. Free simulator.
When a person acquires overseas property through inheritance or bequest, and that property is subject to a foreign tax equivalent to inheritance or estate tax, the same property can end up taxed by both Japan and the foreign country, resulting in double taxation. The Foreign Tax Credit (Inheritance Tax Act, Article 20-2) exists to ease this burden.
Foreign Tax Credit Formula
| Limit 1 | The tax charged abroad that is equivalent to inheritance or estate tax |
|---|---|
| Limit 2 | This heir's inheritance tax amount × (the value of overseas property this heir acquired ÷ this heir's taxable base for inheritance tax) |
The credit amount is whichever of the two limits is lower. Consult a tax accountant or tax office for the exact eligibility requirements and credit amount.
Simulate From the Estate Value, Heir Composition, and Overseas Property Details
What Is the Foreign Tax Credit for Inheritance Tax?
The Foreign Tax Credit (外国税額控除) is a mechanism that reduces a person's Japanese inheritance tax when they acquire overseas property through inheritance or bequest and that same property is also subject to a foreign tax equivalent to inheritance or estate tax. Japan generally follows the principle of "unlimited tax liability" (無制限納税義務): if either the heir or the decedent is domiciled in Japan, the entire worldwide estate is subject to Japanese inheritance tax regardless of where the assets are located. As a result, anyone who inherits real estate, bank deposits, or securities located abroad can end up facing tax obligations in both Japan and the country where the property sits, which is exactly the double taxation this credit was designed to ease.
This simulator only requires four inputs — the total estate value, the statutory heir composition (whether there is a spouse and how many children), the value of the overseas property acquired by the qualifying heir, and the tax charged on it abroad — and then automatically works out whichever of the two credit limits is lower: the tax actually paid abroad, or the portion of Japanese inheritance tax apportioned according to the taxable-base ratio. Because the apportionment behind Limit 2 quickly becomes tedious to calculate by hand once multiple heirs and asset values are involved, automating it here makes it much easier to see in advance how much of the double taxation on an overseas inheritance will actually be relieved, and how much tax remains payable after the credit.
Sources used in this calculation
Statutory figures such as tax and insurance rates come from the public bodies listed below. They change when the law is revised, so please also check the primary source before relying on the result for an important decision.
- Cap on the foreign tax credit against inheritance tax (Inheritance Tax Act art. 20-2) — e-Gov Law Search (Digital Agency, Japan) Effective from 1950-04 ／ Last checked 2026-09-21
- Japanese inheritance tax rate table and basic exemption amount — National Tax Agency (国税庁) Effective from 2015-01 ／ Last checked 2026-09-17
How to Use the Foreign Tax Credit Simulator
- Enter the total estate value Enter the combined taxable base for inheritance tax purposes — that is, the value of the positive assets after subtracting debts and funeral expenses.
- Enter the statutory heir composition Indicate whether there is a surviving spouse and how many children are heirs. The simulator currently supports cases where the only heirs are a spouse and children.
- Choose the heir eligible for the credit Select whether the heir who acquired the overseas property and is claiming the foreign tax credit is a "child" or the "spouse."
- Enter the overseas property value and the foreign tax paid Enter the value of the overseas property acquired by the qualifying heir and the amount of tax equivalent to inheritance or estate tax that was charged on it abroad.
- Review the results The simulator automatically displays Limit 1, Limit 2, the foreign tax credit actually applied, and the tax owed by the qualifying heir after the credit.
Tips for getting more out of it
- The foreign tax credit equals whichever is lower: "the tax charged abroad" or "the portion of Japanese inheritance tax corresponding to that property." If the foreign tax rate is higher than Japan's, the difference cannot be credited and double taxation remains.
- The value of the overseas property must be part of the total estate (taxable base) acquired by the qualifying heir. You cannot enter an overseas property value that exceeds the total estate value.
- Like the consecutive inheritance tax credit, the foreign tax credit has no mechanism to apportion an unused credit amount to other heirs. The qualifying heir's own tax amount is the ceiling.
- If you hold real estate, bank deposits, or securities overseas, checking both the local inheritance/estate tax rules and Japan's inheritance tax rules before an inheritance occurs makes it easier to plan ahead.
When This Tool Is Useful
Preparing for the inheritance of a parent who owns property abroad
If a parent owns a vacation home, an investment property, or a primary residence overseas, understanding roughly how much local inheritance or estate tax will apply — alongside the Japanese-side credit — makes it much easier to plan ahead.
Inheriting a foreign bank account or brokerage account
Deposits held at an overseas bank, or stocks and funds held through a foreign brokerage, also count as overseas property. Some countries levy a withholding-style inheritance tax on these holdings, so this tool helps you check whether the foreign tax credit would apply.
Getting a rough estimate before filing an inheritance tax return
Working out an approximate credit amount and tax due before consulting a tax accountant makes it easier to gather the necessary documents and prepare focused questions.
Cross-checking a tax accountant's estimate
If a tax accountant has already provided a foreign tax credit figure, you can use this simulator to see whether their number is being capped by Limit 1 or Limit 2, which helps you understand the basis for their calculation.
Glossary
- Foreign Tax Credit (外国税額控除)
- A mechanism under Article 20-2 of Japan's Inheritance Tax Act that subtracts a set amount from the Japanese inheritance tax owed when overseas property acquired through inheritance or bequest has already been subject to a foreign tax equivalent to inheritance or estate tax. It exists to ease double taxation.
- Double Taxation (二重課税)
- A situation in which the same property is taxed both by Japan and by the country where the property is located. This tends to arise whenever overseas assets are inherited.
- Unlimited Tax Liability (無制限納税義務)
- The principle under which, if either the heir or the decedent is domiciled in Japan, the worldwide estate is subject to Japanese inheritance tax regardless of where the assets are located. This is the reason overseas property must be included in the Japanese inheritance tax calculation in the first place.
- Total Inheritance Tax (相続税の総額)
- The amount obtained by hypothetically dividing the total estate according to each heir's statutory share, applying the tax rate to each portion, and adding the results together. It is calculated independently of how the estate is actually divided.
- Statutory Share (法定相続分)
- The share of the estate each heir is entitled to under Japan's Civil Code. When the heirs are a spouse and children, the basic split is one-half to the spouse and one-half shared among the children.
- Taxable Base (課税価格)
- The value used as the foundation for calculating inheritance tax — the value of the acquired property after subtracting debts and funeral expenses. It is used in the apportionment calculation behind Limit 2.
- Credit Limit (控除限度額)
- The ceiling on the amount that can actually be credited under the foreign tax credit. Whichever is lower between "the tax charged abroad" and "the portion of inheritance tax apportioned by the taxable-base ratio" is the amount that applies.
Frequently Asked Questions
Side Note — Why Is the Same Property Taxed Twice?
Many countries levy inheritance tax based on the heir's place of residence or the location of the property. Japan generally follows an "unlimited tax liability" principle: if either the heir or the decedent is domiciled in Japan, all of the property is subject to Japanese inheritance tax no matter where in the world it is located. At the same time, the foreign country where the property is situated will typically also tax it under its own inheritance or estate tax system.
As a result, when someone who owns real estate or bank deposits overseas passes away, the same property can be taxed both by "the country where the property is located" and by "the country where the heir resides (Japan)," creating double taxation. The foreign tax credit exists to ease this double taxation, though not always completely.
Because each country designs its own inheritance and estate tax rules independently, the foreign tax credit alone cannot always eliminate double taxation entirely. Some countries have no inheritance tax at all (or have abolished it), so the practical burden can vary greatly depending on where the property is located.