JAPAN TAX BULLETIN
Foreign Tax Credit System in Japan
The Foreign tax credit system is designed to avoid international double taxation. It allows a corporation to deduct, within certain limits, the amount of foreign corporate income tax paid or withheld abroad from its corporate tax liability. A domestic corporation and a foreign corporation which has a permanent establishment in Japan are allowed to take advantage of the foreign tax credit. The following explanations are for a domestic corporation. A foreign corporation is able to take foreign tax credit for eligible foreign taxes on income attributable to a permanent establishment in Japan.