Foreign tax credit (外国税額控除) — how it works

When Japan credits tax you paid abroad, how the share-limit cap is computed, and the NPR remittance rule.

If you paid tax abroad on income that Japan also taxes, you may be able to claim a foreign tax credit (外国税額控除) to reduce double taxation.

Mechanics

The credit is capped by a share-limit formula:

credit = min(foreign_tax_paid, japan_income_tax × foreign_income / total_income)

NPR quirk

For Non-Permanent Residents, only the remitted portion of foreign income enters Japan's taxable base, so only that portion can feed the share-limit calculation.

Treaty forms

Sometimes the better outcome is to reduce the source-country withholding upfront through the relevant tax-treaty notification form.

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