Dividend or Capital draw down (capital gains)

[rjcurran]

Are dividend payments and capital gains (from cashed in investments) from the UK treated any differently when taxed in Japan?

I believe overseas dividends are taxed in Japan at 20.42%, but I am unsure how capital gains are taxed in Japan?

Finally, once I have paid the 20.42% is anything else due, for example municipal and prefecture taxes?

[Tkydon]

Assumptions:
You are a UK Citizen.
You have been in Japan for more than 5 years in the last 10 years.
You are not over 60 years of age.
You are not referring to Lump Sum from a Retirement or Pension Account.
You are referring to UK Dividends on UK Individual Stocks.


There is no Withholding Tax on Dividends in the UK, so you do not need to worry about that and Foreign Tax Credits.
If you are a UK Citizen, you need to check if you have any tax liability. If you have been off shore for a long time, then probably not.

Dividends:
You can choose to either use Aggregate Method Taxation or Separate Method Taxation.
The calculations are complicated, but if your Total Taxable Income after Allowances and Deductions is less that about Y3.5M, or if Foreign Dividends are your only income, about Y6M, then you should probably select the Aggregate Taxation Method. If the Dividends are significant portion of your Income, then the number might be somewhere in between.
If over these amounts, you should probably select the Separate Taxation Method.

The Aggregate Taxation Method uses your Marginal Tax Rate(s) for National, 2.1% of the National Tax Value as Reconstruction, and 10% Residents' Taxes, after Allowances and Deductions.
If you have been charged taxes overseas, then you can claim the Foreign Tax Credit against the National Taxes.

The Separate Method Dividend Taxation Rates are 15% National, 0.315% Reconstruction, and 5% Residents' Taxes.
If you have been charged taxes overseas, then you can claim the Foreign Tax Credit against the National Taxes.

You should run the actual numbers to determine which method would be more beneficial.

Capital Gains:
You can only choose the Separate Method Taxation.
The Capital Gain is taxable, so if you sell, you take the Amount Received, minus the Average Price paid for all units of the instruments sold, minus any Interest Paid on any loan or margin for ownership, and multiply by Forex Rate on the Sale Date.

The Separate Method Taxation Rates are 15% National, 0.315% Reconstruction, and 5% Residents' Taxes.
If you have been charged taxes overseas, then you can claim the Foreign Tax Credit against the National Taxes.

('Residents' Taxes' = Municipal and Prefecture Taxes combined)

The Taxable Income amount assessed for Residents' Taxes could also affect your Health Insurance premiums and Japan Pension Contributions.