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Foreign tax credit for residents of Japan

An explanation of foreign tax credit for residents of Japan

Let’s assume that you have been living in Japan for more than five years.

Then, you are a permanent resident for tax purposes.

Then, if you have an income of 3 million yen in the Philippines, you will also be taxed on 3 million yen in Japan.

However, you have already paid income tax on 3 million yen (profit) to the Philippine tax office.

If you also pay income tax on 3 million yen to the Japanese tax office, you will be paying income tax twice.

In this case, you can apply for a foreign tax credit.

You also have an income of 2 million yen in Japan.

In this case, the calculation formula for the foreign tax credit is as follows.

3 million yen + 2 million yen = 5 million yen

And, you can calculate the income tax in Japan for 5 million yen. Let’s assume it is 10 yen.

10 yen x 3 million yen / 5 million yen = 6 yen

If you have already paid 6 yen or more in the Philippines, you can apply for a foreign tax credit of 6 yen.

Therefore, you only need to pay 4 yen to the Japanese tax office.