First, the conclusion
Foreign tax credit is a system that adjusts double taxation in Japan within a certain range for income taxed in a foreign country. You will need to file a tax return to use it, and not everyone will get the full amount back.
| Check points | way of seeing |
|---|---|
| Things that are likely to be targeted | Foreign income tax on dividends from foreign stocks and foreign ETFs, etc. |
| Necessary procedures | Calculate deductions on your final tax return. |
| upper limit | There are deduction limits depending on your income and tax amount. |
| NISA | Please confirm the handling of foreign taxes within NISA separately. |
The important thing when reading tax articles is not just memorizing the system name. It's about looking at your income, accounts, deductions, and reporting methods separately.
common misconceptions
- I think the foreign tax will definitely be fully refunded.
- Don't compare the time it takes to file a tax return and the amount of your refund.
- Do not keep annual trading reports or payment notices from securities companies.
This is an area where it is easy to get confused just by reading the search article. In particular, "sales" and "income," "income tax" and "resident tax," and "NISA" and "taxable account" need to be treated as different things.
Order of actual checking
If you are confused, it will be easier to organize if you check them in the following order.
- How much foreign tax is deducted
- Is it held in a taxable account?
- Is the amount worth filing a tax return?
- Are you saving the necessary materials?
If it is still difficult to make a decision after looking at the above, it is safer not to leave it to your own judgment. Please check through official channels such as consultation with the tax office, the National Tax Agency's tax return preparation corner, and consultation with a tax accountant.
Summary
Foreign tax credits are worth checking for people who receive a lot of US stock dividends. However, in order to use the system, a declaration is required. Compare the amount of money and effort and make a decision.
While it's hard to get away with not knowing about taxes, there's no need to fear them too much if you sort them out early. When your income increases, when you start investing, or when you want to use deductions, it is most practical to prepare your records early rather than at the end of the year.