U.S. tax services for Americans in Japan
Tailored U.S. tax filing, treaty and foreign tax credit planning, and streamlined catch-up for Japan expats, KK and GK owners, and mixed US–Japan families.
Jump to: Individual Tax Business & Trusts
- US–Japan treaty & foreign tax credit specialists
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Form 5471/ KK & GK specialists - Estate & gift treaty planning for mixed families
- Streamlined catch-up for non-filers
Individual Tax for Americans in Japan
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Click a card to see the forms involved, common issues, and how we handle each situation.
Americans and Green Card Holders Living in Japan
U.S. citizens and green card holders living in Japan generally continue to have U.S. tax filing obligations. We prepare U.S. tax returns covering salary and bonuses, Japanese pension arrangements, equity compensation, and other income earned while living in Japan.
The U.S.–Japan income tax treaty and Totalization Agreement can also affect how your income and social security contributions are treated for U.S. tax purposes.
How We Help
We review your income, Japanese taxes, and social security contributions to determine how the foreign tax credit, foreign earned income exclusion, treaty provisions, and Totalization Agreement apply to your situation. We also consider the timing of Japanese inhabitant tax and how it affects your foreign tax credit.
Get started on an individual returnForms and Tax Rules
Common Issues
- Japanese taxes: Japanese national income tax and income-based inhabitant tax may be available for foreign tax credit purposes, while other taxes may not qualify.
- Inhabitant tax timing: Japanese inhabitant tax is generally collected after the year in which the income was earned, which can affect the year in which the tax credit is claimed.
- Investment products: Japanese investment trusts and certain insurance-linked products may be treated as PFICs for U.S. tax purposes and can create additional reporting requirements.
U.S. Owners of Japanese KK and GK Companies
A Japanese kabushiki kaisha (KK) or godo kaisha (GK) owned by a U.S. person may create additional U.S. reporting and tax requirements, including Form 5471, GILTI, and Subpart F.
How We Help
We prepare the required Form 5471 reporting and review GILTI, Subpart F, Section 962, and the high-tax exception based on the company’s income and Japanese tax position. If the Japanese company also has U.S. activities, we can handle the applicable U.S. business filings, including Form 5472 and Form 1120.
Get started on KK / GK reportingForms and Tax Rules
Common Issues
- CFC reporting: A Japanese KK or GK owned or controlled by U.S. persons may be treated as a controlled foreign corporation (CFC), creating additional U.S. reporting and tax requirements.
- GILTI and Subpart F: Certain types of company income may be taxable to the U.S. owner even when no dividend is paid.
- Tax elections: Elections such as Section 962 and the high-tax exception may affect the U.S. tax treatment, depending on the circumstances.
Mixed U.S.–Japan Families and Estate Tax
U.S. estate tax can apply to certain U.S.-situated assets held by non-U.S. citizens who are not U.S. residents for estate tax purposes. U.S. stocks and U.S. real estate can be among the assets subject to these rules.
The U.S.–Japan estate and gift tax treaty can affect the available estate tax exemption and credits. We review the assets, family relationships, and treaty position and prepare the required estate and gift tax filings.
How We Help
We identify U.S.-situated assets, review the applicable estate and gift tax rules, prepare Form 706-NA and Form 709 where required, and consider the treaty provisions that may apply. We can also assist with ITIN applications for non-U.S. family members.
Get started on estate tax reportingForms and Tax Rules
Common Issues
- U.S.-situated assets: U.S. stocks and U.S. real estate can be subject to U.S. estate tax rules when held by a non-U.S. person.
- Non-U.S. citizen spouses: The unlimited marital deduction generally does not apply in the same way when the surviving spouse is not a U.S. citizen, although special planning may be available.
- Treaty relief: The U.S.–Japan estate and gift tax treaty may affect the available credit or exemption, but the applicable provisions need to be claimed and documented on the relevant filings.
Long-Term Non-Filers
Some U.S. citizens and green card holders living in Japan only become aware of their U.S. filing obligations after living abroad for many years. This may happen when a Japanese bank or securities firm requests U.S. tax or FATCA information.
How We Help
If you have not filed U.S. tax returns while living in Japan, we first review your filing history and circumstances. If you qualify for the Streamlined Filing Compliance Procedures, you generally need to file three years of tax returns and six years of FBARs, along with any other required international information reporting.
Japanese income taxes may also provide foreign tax credits that reduce or eliminate U.S. tax in some cases. We review your Japanese income, taxes, accounts, and investments and prepare the required filings to bring your U.S. tax reporting up to date.
Get started on catching upForms and Tax Rules
Common Issues
- Late discovery: Some U.S. citizens and green card holders only learn about their U.S. filing obligations after a Japanese bank or securities firm requests FATCA information.
- Foreign accounts and investments: Catching up may involve more than filing tax returns. Japanese bank accounts, investment accounts, pension arrangements, and other foreign assets may have separate U.S. reporting requirements.
- Streamlined filing: Eligibility depends on the facts and circumstances, including whether the failure to comply was non-willful.
Scope
What we handle
US expat returns, FBAR and FATCA, the foreign tax credit for Japanese taxes, and the US–Japan treaties. We scope every engagement in writing before work begins.
Discuss your situation- US expat returns (Form 1040) using the US–Japan income tax treaty alongside the foreign earned income and housing exclusions
- Foreign tax credit for Japanese national income tax and the income-based inhabitant (residence) tax — the per-capita levy and consumption tax are not creditable
- Managing the inhabitant-tax arrears mismatch: because it is paid a year late, we advise on the accrual election so the credit lands in the right US tax year
- Treaty pension analysis for kokumin nenkin and kosei nenkin, and Totalization Agreement coordination to avoid double social-security contributions
- Re-sourcing of income under the treaty to relieve residual US tax where the foreign tax credit alone falls short
- FBAR and Form 8938 reporting of Japanese bank, brokerage and pension accounts
- PFIC analysis and Form 8621 for Japanese investment trusts, funds and insurance-linked products
- Japanese company owners (KK and GK) held by US persons: Form 5471, GILTI and Subpart F
- US–Japan estate and gift tax returns (Form 706-NA, Form 709), including the pro-rata unified credit claimed under the treaty
- Streamlined Filing Compliance Procedures for non-filers, and ITIN applications (Form W-7) for non-US family members
Business & trust services in Japan
U.S. Tax for Japanese Businesses & Foreign Trusts
In addition to personal returns, we handle Controlled Foreign Corporation reporting for Japanese KK and GK companies and foreign trust disclosures.
KK and GK Companies and U.S. Business Tax
Japanese kabushiki kaisha (KK) and godo kaisha (GK) owned by U.S. persons may create additional U.S. reporting and tax requirements, including Form 5471, GILTI, Subpart F, and Section 962. If the company also operates or invests in the U.S., additional U.S. business filings may apply.
How We Help
We prepare the annual Form 5471 reporting and review GILTI, Subpart F, Section 962, and the high-tax exception based on the company’s income and Japanese tax position. When the Japanese company has U.S. activities, we also handle the applicable U.S. business filings, including Forms 5472, 1120, and 1120-F.
Get started on KK / GK reportingForms and Tax Rules
Common Issues
- CFC reporting: A KK or GK owned or controlled by U.S. persons may be treated as a controlled foreign corporation (CFC), which can create additional U.S. reporting and tax requirements.
- GILTI and Subpart F: Certain types of company income may be taxable to the U.S. owner even when no dividend is paid.
- Tax elections: Section 962 and the high-tax exception may affect the U.S. tax treatment. Japan’s corporate tax position can be relevant when evaluating whether these rules apply.
- U.S. operations: A Japanese company doing business in the U.S. may have additional U.S. filing requirements, including Form 5472 for certain related-party transactions.
Foreign Trusts and Cross-Border Estates
U.S. citizens and green card holders with Japanese family trusts or other foreign trusts may have additional U.S. reporting requirements. This can include trust distributions, gifts or inheritances from non-U.S. persons, and reporting by U.S. beneficiaries.
How We Help
We review the trust structure and determine how it is treated for U.S. tax purposes. We prepare the required Form 3520 and Form 3520-A filings, review distributions and beneficiary reporting, and can also assist with late filings and reasonable-cause statements where applicable.
Get started on trust reportingForms and Tax Rules
Common Issues
- Foreign gifts and inheritances: Certain gifts or inheritances from non-U.S. persons may need to be reported on Form 3520. Reporting the transfer does not generally make the gift or inheritance itself taxable, but penalties can apply when required reporting is missed.
- Japanese inheritance tax: Japanese inheritance tax and U.S. reporting rules can apply to the same transfer, and the treatment depends on the circumstances.
- Trust classification: Whether a foreign trust is treated as a grantor or non-grantor trust can affect the U.S. reporting and tax treatment, including how distributions are handled.
- Late Form 3520-A filings: If a foreign trust does not file Form 3520-A when required, the U.S. owner may need to file a substitute Form 3520-A with the required information.
Scope
What we handle for Japanese KK and GK companies
Form 5471 reporting, GILTI and Subpart F, the elections that change the result, and the filings that follow when you expand into the US market. We scope every engagement in writing before work begins.
Discuss your situation- Form 5471 reporting for Japanese KK and GK companies owned by US persons, year by year
- GILTI and Subpart F computations, including Form 8992 and Form 8993
- Section 962 and high-tax election modelling before the return is filed
- US corporation and partnership returns for a US arm: Form 1120, Form 1120-S, Form 1065 with Schedules K-2 and K-3
- Foreign-owned US entities: Form 5472 with pro forma Form 1120, and Form 1120-F where a foreign company has US business
- Entity classification elections (Form 8832) with late-election relief, foreign partnerships (Form 8865) and transfers to a foreign corporation (Form 926)
Scope
What we handle for foreign trusts
Form 3520 and 3520-A reporting, owner and beneficiary statements, and the distribution analysis for US beneficiaries. We scope every engagement in writing before work begins.
Discuss your situation- Transactions with foreign trusts: Form 3520 for contributions, distributions, and large gifts or bequests from non-US persons
- Foreign grantor trust returns on Form 3520-A, or a substitute 3520-A where a foreign trustee will not file
- Owner and beneficiary statements for the trust’s US owners and beneficiaries
- Grantor and non-grantor classification, which determines every filing that follows
- Distributions to US beneficiaries: DNI / UNI analysis, the throwback rules and Form 4970
- Catch-up and penalty response: delinquent Form 3520 and 3520-A filings with reasonable-cause statements
IRS Compliance Tool
Which U.S. tax forms apply to your Japan setup?
Select the items that match your financial footprint in Japan to preview your likely U.S. reporting requirements and foreign disclosure forms.
FAQ
US tax in Japan: common questions
Japanese tax is high, so does the foreign tax credit wipe out my U.S. tax?
Bottom line Often on Japanese salary income, but U.S.-source income, investment income, and timing differences can still result in U.S. tax.
Japanese national income tax and income-based inhabitant tax can provide substantial foreign tax credits against U.S. tax on Japanese-source earned income. In some cases, this may reduce the U.S. tax on that income to zero.
The result is not automatic. U.S.-source income, certain investment income, and differences in when Japanese taxes are paid can still leave U.S. tax to pay. Where the foreign tax credit is not enough, the U.S.–Japan tax treaty may provide re-sourcing rules that can allow additional foreign tax credits in certain circumstances.
Which Japanese taxes can I claim as a foreign tax credit?
Bottom line Japanese national income tax and the income-based portion of inhabitant tax may generally qualify for the foreign tax credit.
Japanese national income tax and the income-based portion of local inhabitant tax can generally be claimed as foreign tax credits against U.S. tax. The flat per-capita portion of inhabitant tax does not qualify because it is not based on income.
Japanese consumption tax is also not treated as an income tax for U.S. foreign tax credit purposes. We separate the different components of your Japanese tax payments so that only qualifying taxes are included in the credit calculation.
How does the inhabitant tax timing affect my U.S. credit?
Bottom line Inhabitant tax is generally paid after the year in which the income was earned, so the timing can affect when the foreign tax credit is available.
Japanese inhabitant tax is generally assessed based on the previous year’s income and paid during the following year. If you use the cash basis for foreign taxes, this can create a mismatch between the year the income is reported in the U.S. and the year the Japanese tax is paid.
An accrual election may allow the tax to be matched to the year in which the related income was earned. We review the timing and determine which method is appropriate for your circumstances.
How are my Japanese pension and U.S. Social Security handled?
Bottom line The income tax treaty addresses the taxation of pension income, while the Totalization Agreement coordinates Social Security and pension coverage between the two countries.
The U.S.–Japan income tax treaty contains rules for pension income, including Japanese pensions such as kokumin nenkin and kosei nenkin. The U.S.–Japan Totalization Agreement addresses Social Security coverage and can help prevent the same employment from being subject to Social Security taxes in both countries.
We review your employment history, pension contributions, and pension income to determine how the treaty and Totalization Agreement apply to your situation.
We are a mixed U.S.–Japan family. How does the estate tax treaty help?
Bottom line The U.S.–Japan estate and gift tax treaty may provide a non-U.S. citizen with a prorated share of the U.S. unified credit, rather than applying only the standard non-resident threshold.
A nonresident who is not a U.S. citizen can generally be subject to U.S. estate tax on U.S.-situated assets above $60,000. The U.S.–Japan estate and gift tax treaty can provide additional relief in certain circumstances, including a prorated unified credit based on the value of U.S.-situated assets relative to the person’s worldwide estate.
The treaty relief generally needs to be claimed on the applicable estate tax return. We review the family structure, U.S.-situated assets, and Japanese assets and prepare the required Form 706-NA filing.
Work with us
US tax obligations in Japan?
- 01 You describe the situation in a few sentences.
- 02 We respond within one business day and tell you which US filings it involves.
- 03 We scope and quote the work in writing before it begins.
Prefer email? info@lcwtax.com
Prefer to call? +852 3008 8218 (Hong Kong) +1 437 837 1029 (Toronto)
