We do not prepare U.S. tax returns directly. However, we can introduce you to a trusted local professional. We provide the Japanese-side information and coordination required for claiming the foreign tax credit on U.S. tax returns. If you are already working with a U.S. accounting firm, we can also coordinate with them.

Yes. We provide consultation on inheritance tax planning, as well as on the establishment and operation of companies in Japan. Depending on your circumstances, we work with professionals experienced in U.S. and Japanese tax and legal matters to deliver comprehensive support.

Yes, we offer consultations in English, so your U.S. citizen spouse can feel free to consult with us. To help us accurately understand your situation and questions, we would appreciate it if you could prepare a brief memo in advance.

First, please consult with professionals as early as possible. Advice from U.S. tax advisors, U.S. attorneys, Japanese tax professionals, and others—each from their respective perspective—is essential. Organizing the necessary procedures, creating a to-do list, and proceeding in a planned and systematic manner is the first step toward a smooth return to Japan.

Representative measures include the following:

– Selling your U.S. residence before returning to Japan.
– Planning and carrying out remittances to Japan, taking into account both tax risks and potential tax savings.
– Consider and implement lifetime gifts utilizing the U.S. Unified Credit.
– Evaluate the timing of closing a Roth IRA.

However, the appropriate approaches vary depending on your asset composition and family circumstances. Through individual consultation, we can propose the most appropriate measures for your situation.

Whether you’re considered a tax resident in Japan is determined by a comprehensive evaluation of various factors, not just the presence of your Juminhyo. These factors include your duration of stay, occupation, primary residence, location of family, and location of assets. Therefore, even if your Juminhyo remains in Japan, you may still be deemed a “non-resident” for Japanese tax purposes if where you principally live is recognized as being in the U.S.

Your tax residency will depend on factors such as the length and location of your stay in Japan and whether you continue to maintain your primary residence in the U.S. Generally, if your stay in Japan is long-term, you are more likely to be considered a tax resident under Japanese tax law. Please be aware of this.

The “10-year rule” means that, even if you currently live in the U.S., you may still be subject to Japanese gift or inheritance tax if you had a domicile (jusho) in Japan at any time within the past 10 years.

The application of this rule depends on the nationality and residency status of both the giver/decedent and the recipient/heir, so please consult us directly for details.

First, please understand that the sale date of real estate is based on the closing date (actual transfer of ownership), not the contract date.

If you sell your U.S. home after returning to Japan, at least your wife (Japanese national with U.S. permanent residency) will need to file a tax return in Japan. Your husband (U.S. citizen) will also need to file a tax return in Japan if he makes remittances to Japan in the same year as the sale.

Furthermore, to apply the special deduction of ¥30 million for the capital gain on the sale, you’ll need to prove that the U.S. property sold was indeed your primary residence. Therefore, we recommend preparing and keeping supporting documents that demonstrate your residency, such as utility bills and mail from public institutions, before your return.

For inheritance and gift taxes, there’s generally no significant difference in Japanese tax treatment whether you obtain U.S. citizenship or not. If someone who acquired U.S. citizenship and renounced Japanese nationality resides in Japan, they often obtain a status-based visa like “Spouse or Child of Japanese National.” Individuals with such visas are treated similarly to Japanese nationals for inheritance and gift tax purposes. Therefore, the tax implications will be equivalent to those for a Japanese national holding a U.S. permanent resident card.

However, there are differences in income tax treatment.
If you obtain U.S. citizenship, you’ll be treated as a “non-permanent resident” for the first five years of residency in Japan. During this period, foreign-sourced income is generally taxed only if it’s remitted to Japan (remittance-based taxation).
In contrast, if you maintain your U.S. permanent residency while residing in Japan, you’ll be treated as a “permanent resident” from the date you become a Japanese resident, and your worldwide income will be subject to taxation regardless of remittance.

Note that abandoning U.S. permanent residency may trigger the U.S. exit tax, so it’s necessary to confirm and consider the U.S. tax implications beforehand.

Individuals born with both Japanese and U.S. nationalities, often referred to as “dual nationals,” are treated as Japanese nationals under Japanese tax law. Inheritance and gift tax implications are also determined similarly to those for Japanese nationals.

Please note that if you voluntarily choose U.S. citizenship after reaching adulthood, your Japanese nationality is automatically deemed lost under Japanese law, even if you have not completed the administrative notification procedures in Japan. In this case, you will also be treated as a ‘non-Japanese national (U.S. national)’ under Japanese tax law. Please be aware of this.

Remittances are generally not taxable, as they are simply a transfer of funds.
However, caution is needed in cases between spouses if the ownership of the funds does not match the name on the receiving account. For example, if funds held 50/50 by a married couple are transferred entirely into the wife’s account, it may be deemed a gift and subject to Japanese gift tax.

Under Japanese tax law, ownership of jointly held accounts is determined based on who actually contributed the funds and in what proportion—not simply whose name is on the account. So even with a joint account, each person’s share is determined in proportion to their actual contribution.
If you live in a community property state such as California, Texas or Washington, additional considerations may apply, so we recommend consulting with a qualified professional.

One approach is to temporarily remit the funds to your wife’s account and then transfer them to your husband’s account once he is able to open one in Japan (which typically takes around six months). If you can clearly demonstrate the flow of funds, you can avoid the risk of gift tax being assessed.

There are differing views on this point between tax accountants and the tax authorities. The tax authorities take the position that foreign exchange gains should be recognized, so it’s advisable to plan your remittances based on this premise.

If the source of the remitted funds is clear, such as the sale of a U.S. home, the foreign exchange gain is calculated based on the exchange rate difference between the sale date and the JPY conversion date. The issue is with deposits and savings funded by U.S. salary and other income. Because it is difficult to accurately determine when the U.S. dollars were acquired, there are cases where exchange gain calculations cannot be performed in practice.

As a countermeasure, options include converting the funds to JPY while still residing in the U.S., or remitting the funds in USD without conversion.

Your husband will be treated as a “non-permanent resident” for five years after becoming a Japanese resident. During this period, domestic-sourced income (in full) and foreign-sourced income remitted to Japan will be subject to declaration and payment in Japan. Therefore, if possible, it’s advisable to cover living expenses during the non-permanent resident period with your wife’s funds.

Note that “remittance” includes not only bank transfers but also remittance services such as Wise and deductions from U.S. accounts via card payments in Japan, so caution is needed.

Also, be aware that capital gains from privately negotiated transactions of unlisted securities and capital gains from listed securities acquired during the non-permanent resident period are considered domestic-sourced income and are subject to declaration in Japan.

First, we explain how the inquiry is sent to you. When you send over ¥1 million in a single remittance from the U.S. to Japan, the receiving bank is obligated to report this information to the tax office by the 10th of the month following the arrival date. Based on this report, if the tax office determines there’s a possibility of undeclared income or a gift requiring further confirmation, they will send a document called an “Inquiry about Overseas Remittances, etc. (Kokugai Sōkin-tō no Otazune)” to the individual. These inquiries are typically received about a year after the remittance.

If you receive such an inquiry, you are required to confirm whether there’s any undeclared foreign income or if the remittance qualifies as a gift, and respond by the specified deadline.

The inquiry is administrative guidance requesting the voluntary provision of information, not a tax audit. Therefore, there is no direct penalty even if you do not respond. However, neglecting it could lead to a tax audit. Therefore, if you receive the inquiry, we recommend that you do not ignore it, promptly consult with a tax accountant, and take appropriate action.

If you are a U.S. citizen or U.S. permanent resident living in Japan, you are required, in principle, to file tax returns in both the U.S. and Japan. Japan’s income tax filing deadline is March 15 each year, while the U.S. filing deadline for U.S. nonresidents (U.S. citizens and permanent residents (green card holders) living abroad, as well as nonresident aliens) is automatically extended by two months to June 15 each year. Typically, the process is to file the Japanese tax return first and then file the U.S. tax return based on the Japanese return information.

The foreign tax credit is generally claimed on the U.S. tax return.This credit allows you to offset your U.S. tax liability with the amount of tax paid to Japan, thereby eliminating double taxation between Japan and the U.S. After applying the foreign tax credit, if any U.S. tax remains, that amount must be paid to the U.S.

Japanese tax law does not contain explicit provisions regarding the taxation of IRA or 401(k) distributions. In practice, they are generally interpreted and treated in a manner similar to non-qualified retirement pensions, and only the portion attributable to investment gains is reported as taxable income.

The specific tax classification depends on the distribution method:

– If distributed on an ongoing basis as an annuity, it is reported as miscellaneous income (other).
– If distributed as a lump sum, it is reported as occasional income, calculated as

(total distribution amount − cost basis − ¥500,000 special deduction) × 1/2.
Because this calculation reduces the taxable income by half, taking a lump-sum distribution is often more advantageous from a tax perspective. Here, a key challenge is determining the taxable investment gains.

Since U.S. taxation is based on the distribution amount, statements issued at the time of distribution typically do not include past contribution amounts. Therefore, you will need to locate your own contribution records and calculate the principal contribution amount yourself. Additionally, for 401(k) plans, employer matching contributions are generally interpreted to be included in the principal, so it is advisable to confirm them together with your own contributions.

country of residence at the time of distribution. Therefore, under normal circumstances, taxation is completed only in Japan.

However, if you are a U.S. citizen or a U.S. permanent resident residing in Japan, the Saving Clause of the U.S.-Japan Tax Treaty applies. This clause allows the U.S. to retain the right to tax its residents and citizens based on U.S. tax law, without applying the provisions of the treaty. Therefore, you will still need to file with the U.S. as well.

As explained in Q4-2, the taxable portion in Japan is interpreted as the investment gains portion of the distribution amount. For this reason, it is more tax-advantageous if taxation is completed solely in Japan.

Therefore, if you are a U.S. permanent resident, we recommend taking distributions after renouncing your permanent residency. However, if you fall under the “Covered Expatriate” definition under U.S. tax law, your IRA will be subject to lump-sum taxation upon renouncing your permanent residency. Therefore, separate consideration of U.S. tax regulations is necessary. Please note this.

For U.S. citizens, filing is required in both Japan and the United States, and taxes paid in Japan are credited against U.S. taxes. Therefore, it is advisable to plan your distributions strategically, taking into account the applicable U.S. tax rates.

If you reside in Japan and receive Social Security benefits, you must report the amount as “miscellaneous income (public pensions, etc.)” on your tax return. Note that Social Security benefits are considered foreign-sourced income, so U.S. citizens will be subject to remittance-based taxation, meaning tax will be levied on the remitted amount.

Under the provisions of the U.S.-Japan Tax Treaty, these pensions are taxed only in the U.S. and are not subject to taxation in Japan. Therefore, if a U.S. citizen remits such a retirement pension to Japan, it does not need to be reported on a Japanese tax return.

Income generated from U.S. investment accounts (interest, dividends, capital gains) must, in principle, be reported on your Japanese tax return. For capital gains in particular, it is crucial to calculate them by considering exchange rate fluctuations from the acquisition date to the sale date. Therefore, it is important to retain acquisition information (acquisition date, quantity, acquisition price, etc.).

Maturity proceeds from U.S. private insurance (such as life insurance and deferred annuities) are, in principle, taxed as “occasional income” under Japanese tax law.

Yes, they do. An LLC (Limited Liability Company), even if it elects pass-through taxation in the U.S., is in principle treated as a “foreign corporation” under Japanese tax law. If a Japanese resident operates a business as a sole member of an LLC, that individual is likely to be deemed to constitute a Permanent Establishment (PE) of the LLC in Japan. Therefore, that individual will need to file a corporate tax return or report the business income as sole proprietorship income.

On the other hand, an LPS (Limited Partnership) or LLP (Limited Liability Partnership) is, in principle, treated as an “unincorporated partnership” under Japanese tax law. Therefore, if you receive distributions from such an investment, you will need to classify the income generated in the U.S. into the appropriate Japanese income categories based on the Schedule K-1 issued in the U.S., and file a tax return.

Both options have advantages and disadvantages.

Advantages of keeping assets in the U.S.:
Diversification across U.S. and Japanese markets can reduce risk. U.S. financial institutions offer many attractive investment opportunities and tend to demonstrate higher performance.

Disadvantages:
Managing overseas assets is burdensome, including tasks such as communication with local financial institutions. When filing Japanese tax returns, professional support is often required, and this also incurs costs. Upon inheritance, assets may not be immediately liquidated or transferred, and this may create challenges in maintaining liquidity. When family members inherit overseas financial assets, dealing with English-language documentation and international procedures may be burdensome.

Considering these factors, many of our clients tend to plan a gradual transfer of assets to Japan. However, the appropriate approach depends on your asset size, investment strategy, and family circumstances. If you have any concerns, please consult with us individually.