Is it possible to claim foreign tax credit to avoid TRIPLE taxation?

[ChapInTokyo]

I usually file for foreign tax credit on the taxes withheld by my US online broker's clearing house but have never considered whether it might be possible to file for foreign tax credit on the taxes withheld by the originating countries of dividends on international stocks and bonds held by say VXUS or BNDX.

Today I stumbled on this document on the Vanguard website which lists the foreign taxes paid by applicable Vanguard funds as a percentage of the dividends paid to investors in the funds. For example, Total International Stock (VXUS) paid 6.80% foreign tax, Total International Bond (BNDX) paid 0.26% foreign tax, and FTSE All-World ex-US Small Cap (VSS) paid 9.30% on the dividends they paid in 2023.

Question to all you veterans on the board is this. Is it possible to claim foreign tax credit on these tax amounts paid to foreign tax authorities by the US ETF or funds, so that you get to avoid triple taxation by the originating country, the US, and then Japan?

2023 Foreign tax credit information for eligible Vanguard funds
https://investor.vanguard.com/content/d ... s-2024.pdf

[adamu]

Is it possible to claim foreign tax credit on these tax amounts paid to foreign tax authorities by the US ETF or funds, so that you get to avoid triple taxation by the originating country

Don't think so.

I'm talking about Japanese tax credits. I'm not sure about US.

[ChapInTokyo]

Is it possible to claim foreign tax credit on these tax amounts paid to foreign tax authorities by the US ETF or funds, so that you get to avoid triple taxation by the originating country

Don't think so.

I'm talking about Japanese tax credits. I'm not sure about US.

The Vanguard document is intended to help US investors get foreign tax credit using IRS form 1099-DIV but I'm wondering whether the National Tax Agency in Japan will let you claim tax credit on not just the taxes withheld by the IRS in the US, but also on the taxes withheld by the originating countries of the stocks held in the Vanguard ETFs by filling in the combined amount in the kakuteishinkoku, and attaching the Vanguard document as supporting documentation.

This would not be possible in NISA of course, but in a taxable account either here in Japan or at an overseas online broker.

[adamu]

I'm wondering whether the National Tax Agency in Japan will let you claim tax credit on not just the taxes withheld by the IRS in the US, but also on the taxes withheld by the originating countries of the stocks held in the Vanguard ETFs

For a tokutei kouza, the annual witholding statement only includes the US witholding tax, and the Japanese taxes are only adjusted with that in mind.

It's an interesting idea to try to claim all the other foreign taxes too. I can imagine the effort required to do it wouldn't be worth the savings, if it is allowed. I don't know the answer but would love to add that info to the wiki if we find out.

[ChapInTokyo]

I'm wondering whether the National Tax Agency in Japan will let you claim tax credit on not just the taxes withheld by the IRS in the US, but also on the taxes withheld by the originating countries of the stocks held in the Vanguard ETFs

For a tokutei kouza, the annual witholding statement only includes the US witholding tax, and the Japanese taxes are only adjusted with that in mind.

It's an interesting idea to try to claim all the other foreign taxes too. I can imagine the effort required to do it wouldn't be worth the savings, if it is allowed. I don't know the answer but would love to add that info to the wiki if we find out.

I'll try to find out. I have about $55k worth of VXUS and $50k worth of BNDX in my account from which about $120 of foreign taxes were paid to the various origin countries' tax authorities. That works out at around 3.04% of last year's dividends from these two international ETFs due to bonds being hardly taxed at all but it'll be interesting to see whether the NTA in Japan will recognise these withholding taxes as being eligible for foreign tax credit, or perhaps make noises about only taxes withheld by tax authorities of countries with whom Japan has a treaty for the avoidance of double taxation are eligible or something. If they respond with something like that, then the matter would get much too troublesome to be worth bothering about...