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
Tips
- 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 (money.wealth.consecutive_inheritance_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.
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.