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| Foreign Tax Credit and Deduction from Inheritance Tax Due in Japan |
| Introduction |
| Under the U.S.-Japan estate gift and tax treaty, the Foreign Tax Credit permits tax paid overseas that is similar to or the equivalent of the inheritance tax in Japan, to be deducted from the inheritance tax amount due in Japan.
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| Requirements to fulfill for the Foreign Tax Credit to be applied |
In order to be able to qualify for the Foreign Tax Credit, under the Japanese laws, the heir or beneficiary must 1) Receive a foreign asset via inheritance; and 2) Tax that is similar to the inheritance tax in Japan was levied upon the asset in the foreign country in accordance with the law of that foreign country (e.g. estate tax in the United States).
Therefore, if a Japanese heir succeeds to an asset of a deceased that is located outside of Japan, and such asset was subjected to a tax that is similar to the inheritance tax in Japan in the country in which the asset exists, the tax levied upon such asset will be able to qualify for the Foreign Tax Credit.
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| How the Foreign Tax Credit can help avoid Double Taxation |
An asset that a deceased Japanese national held in a foreign country outside of Japan can be subjected to the inheritance tax in Japan. Such asset can also be levied a tax that is similar to or the equivalent of an inheritance tax in Japan, in the foreign country that the asset originates from. In such case, some form of tax can be levied upon the same asset in both the foreign country in which the asset originates from, and in Japan.
In order to avoid such double taxation, the tax paid in the foreign country can be deducted from the Japanese inheritance tax due in Japan. Under the Japanese law, the lesser of 1. The tax amount paid overseas; or 2. Amount of Inheritance Tax Due in Japan × (Total Value of Asset(s) in Foreign Country ÷ Total Value of Entire Asset(s) Inherited by Heir) can be deducted from the inheritance tax amount due in Japan.
For example, say an heir inherited an equivalent of 40,000,000 JPY from overseas assets, and inherited 60,000,000 JPY worth of assets in Japan. The amount of inheritance tax to be paid in Japan is 50,000,000 JPY, while the estate tax amount paid in the U.S. was equivalent to 8,000,000 JPY. When the formula in 2. above is applied, 50,000,000 JPY × (40,000,000 JPY ÷ 100,000,000 JPY) = 20,000,000 JPY. Since 20,000,000 JPY is more than 8,000,000 JPY, which was the estate tax amount paid in the U.S., the heir will be able to deduct the lesser of the two amounts (i.e. 8,000,000 JPY) from the 50,000,000 JPY inheritance tax amount that is due to be paid in Japan. In total, the heir will owe 42,000,000 JPY in inheritance tax in Japan.
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| Conclusion |
| In the event that you pay any taxes overseas that is similar to the inheritance tax in Japan, it is good to know that it is likely to qualify for the Foreign Tax Credit and can be deducted on the inheritance tax return in Japan. |
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| I started a podcast for the Hongo Law Office, LLLC! |
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I started a podcast for the Hongo Law Office, LLLC!
While I will mainly discuss estate planning/administration issues by myself each month, I also welcome guests on my podcast. I am now inviting anyone to be on my show. Please email me at yuka.hongo12@gmail.com if any of you might be interested in appearing as a guest on my show!
Please listen to Episode 7 from the link below. In Episode 7, I spoke with Akiyo Inoko Hewett, a lawyer making waves from her own legal practice in Atlanta Georgia that span the U.S. and Japan. Akiyo shows us how you can have an impact from anywhere in the world, through working in the law and your unique combination of skills can help businesses when they need it most. We also speak about her lifestyle in Atlanta and the wisdom from Akiyo's father on the importance of networks and community. Please enjoy this episode!
Episode Link |
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| Client Comments |
| "Lawyers in the U.S. can be difficult to talk to at times, but I think people find it easy to talk to Ms. Hongo. I also like the fact that Ms. Hongo follows up with her clients on a timely basis." |
| Sachiko Trillo, Honolulu |
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| "Hongo Tsuji Tax & Consulting, our accounting firm, introduced me to Ms. Hongo. I consulted her with regards to estate planning, and I appreciated the fact that she took care of our documents in a timely manner." |
| K.A., Tokyo |
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| "I appreciated Ms. Hongo's professional expertise and the kind way in which she took care of our matter. I am truly happy that she helped us." |
| Mitsuko Seto, Osaka |
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| "Ms. Hongo not only prepared my trust, but also took care of legal matters involving my company. Her fee is reasonable and she follows up with you in a timely manner." |
| S. Suzuki, Company Owner |
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| "Ms. Hongo took care of our matter in a kind manner. We liked the fact that her office was located in Waikiki, near our home." |
| Sugiyama, Waikiki |
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| "I became a successor to 2 condominiums that my wife owned in Hawaii, after my wife passed away. Ms. Hongo took care of our probate matter in a short timeframe of 1 year. We feel very grateful to her." |
| Shuichi Sakamoto, Nasu |
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| "Our clients were very satisfied with Ms. Hongo's service because she was able to explain matters such as probate in an easy-to-understand manner. Ms. Hongo is someone we can rely on for any matter." |
| Noboru Ohhashi, List Sotheby's, Tokyo |
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| "Given that the U.S. real estate recording process and its pertaining laws differ from those of Japan, and it is difficult to learn about them in English, I appreciated Ms. Hongo being able to explain them to me in an understandable manner. I would like to seek her help in the future for other matters." |
| K. Iwasaki, Honolulu |
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| "Ms. Hongo helped me with the estate planning for my real estate in Hawaii. I was glad she was able to help me during her visit in Japan." |
| S.T., Kawasaki |
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| "It was our long-term goal to prepare a trust for our family. We are now able to take the next step in our lives, as Ms. Hongo applied her proficient bilingual skills to efficiently take care of our matter. We are very grateful for what she did for us." |
| A.P., Honolulu |
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| Attorney Yuka Hongo has been included as an honored listee in Marquis Who's Who for 2024. Marquis has chronicled the lives of accomplished individuals and innovators since 1898. |
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| Hongo Law Office LLLC is proud to have been acknowledged as one of the "Best Probate Attorneys in Honolulu for 2025" by Expertise.com. |
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| Attorney Yuka Hongo has been named a 2025 Elite Lawyer in the area of Estate Planning in Hawaii. The award recognizes attorneys who have displayed a high level of competence in their practice. |
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| You're invited to call or email |
"If you have questions about estate planning and administration, please don't hesitate to call. I'll be glad to hear from you." – Yuka
Call (808) 237-9944 or email yuka.hongo12@gmail.com |
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| Meet Yuka Hongo, Esq. |
| Yuka Hongo is a respected estate planning attorney based in Honolulu, Hawaii. She has practiced law for 10 years and is fluent in both English and Japanese. |
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Practice Areas: Yuka represents clients in matters related to estate planning such as the preparation of Trusts, Wills, and the Transfer on Death Deed. She also provides services in the area of estate administration, including probate.
Education: In 2000, Yuka graduated from Oberlin College (Oberlin, OH), where she earned a Bachelor of Arts Degree in Economics and East Asian Studies. In 2004, she graduated from Loyola Law School (Los Angeles, CA), where she earned her Juris Doctor Degree. In 2022, Yuka graduated from Keio University (Tokyo, Japan) where she earned a Master of Laws Degree.
Court Admissions and Bar Memberships: Yuka is a member of the Hawaii, California, the District of Columbia Bar, and New York Bar Associations. Yuka is a member of the Advisory Committee for the Hawaii Tax Institute Program.
Additional Qualifications: Yuka is a Certifying Acceptance Agent who can obtain the ITIN tax number for foreigners in the U.S. In addition, she is a Life Insurance Agent and a licensed Notary Public in the State of Hawaii. Also, Yuka is fully bilingual in Japanese and English and has in-depth legal work experience working with both languages.
Multicultural Background: Yuka has experience living and working in both the U.S. and Japan and has a thorough understanding of both cultures in these two countries. In addition, she loves working with people from other multicultural backgrounds and working on international matters.
Educational Presentations: Yuka has presented seminars in Japan and in the U.S. relating to various estate planning/estate administration issues.
Residence & Interests: Yuka lives in Honolulu, Hawaii and is single. She enjoys scoping out new eateries and restaurants. |
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