Overseas Dependent Deduction

Introduction: Tax Issues When Having Family Abroad and the Importance of Overseas Dependent Deductions

In today's increasingly globalized world, more people are living in Japan while having family members abroad. For example, this includes those who have returned from overseas assignments, those in international marriages, or those with relatives living overseas. In this context, the "Overseas Dependent Deduction" under Japanese income tax law is a powerful tool for reducing tax burdens. However, unlike domestic dependent deductions, the overseas dependent deduction has strict requirements for documentation, and misunderstandings can lead to denials from the tax office. This blog will provide a detailed explanation of the overseas dependent deduction, including its overview, application process, and important points to consider, based on Japanese income tax law.

1. What is the Overseas Dependent Deduction?

The overseas dependent deduction under Japan's income tax law is a special provision that applies when a taxpayer has dependents living abroad.

This deduction is particularly important for people with international family situations and Japanese individuals working abroad.

2. Scope of Application and Eligible Persons

To receive the overseas dependent deduction, specific conditions must be met.

This chapter details the specific conditions and requirements for receiving the deduction.

Definition of Relatives

•  It is a requirement to be a relative residing outside of Japan.
  
•  Includes cases where relatives have Japanese nationality or residency status
  

Income restriction

• To be recognized as a dependent relative, the income of that relative must be below a certain amount.
  

3. Application Procedures and Required Documents

To receive the overseas dependent deduction, appropriate procedures and submission of documents are required.

Application Process

•  It is necessary to apply for deductions when filing a tax return.
  
•  Specific documentation is required because the dependent relatives live abroad.
  

Required documents

•  Certificate of residence in the country where the dependent relatives reside
  
•  Certificate of Identity for Support Obligors
  
• Documents proving income and dependent relationships
  

4. Understanding the Income Tax Deduction Requirements for Overseas Dependent Relatives from the 2024 Amendment Points

The deduction for overseas dependents under Japan's income tax law has been significantly tightened with the amendments for **2023 (from the 6th year of Reiwa)**.

Key Points of the Amendment

Relatives living abroad who are between 30 and 69 years old are generally not eligible for deductions. However, exceptions apply if they meet any of the following conditions:

• being enrolled as an international student.
  
• being qualify as a person with a disability
  
• being able to prove remittances of living expenses and education costs of over 380,000 yen per year
  

5. Three Key Perspectives to Consider in International Tax Practice

1. Definition and Scope of Deductible Persons​

•  Age 16 and over, under 30 (e.g., international university students)
  
•  70 years old and above (elderly relatives)​
  
•  Between 30 and under 70 years old, one of the following:
  •  international student
    
  •  person with a disability
    
  •  Proof of remittance of over 380,000 yen per year
    

※The scope of relatives is defined as "blood relatives within the sixth degree or in-laws within the third degree," and it is necessary to meet the conditions of having a shared livelihood and an annual income of 480,000 yen or less (approximately 930,000 yen based on income).

※The spouse is not subject to this amendment.

2. Core Changes of the 2023 Amendment

Element​	Before the amendment (up to 2022)	After the amendment (2023 and onwards)
Handling of ages 30 to 70	Unconditionally applicable	International students / Persons with disabilities / Only remittances of 380,000 yen or more are eligible
Necessary evidence documents	Proof of kinship only	Both family relationship and remittance proof
Handling of Spouse	Excluded	No changes (excluded)

The background of the amendment is to ensure fairness with "relatives residing in the country," particularly with the intention of eliminating cases where financial support is unclear.

6. Summary - Utilizing Foreign Dependent Deductions for a Smart Tax Strategy

The overseas dependent deduction offers significant benefits for global families residing in Japan. If the conditions are met, it can greatly reduce the tax burden, but the strictness of the documentation is a hurdle. As explained in this blog, proper preparation and accurate application are the keys to success.