Re: Taxes on Gain and Dividend???
Posted: Thu Jun 17, 2021 5:38 am
Cross Post...
I went through to confirm the Intricate Detail of Dividend Taxation in Japan.
You can select one of three methods for Taxation of Dividends:
1. For Dividends paid on Japanese Securities by Japanese Entities through Japanese Brokers, Tax will be withheld at 20% + Reconstruction Tax 0.315%. Since this is the Dividend Tax Rate, you would not need to file a Tax Return if the total amount of the dividends is less than Y200,000. You will receive a Gensenchosu 源泉徴収票 From the Japanese Broker. You cannot use this for Foreign Stocks as no Japanese Tax will have been withheld.
or
You can File a Year End Tax Return (Kakutei Shinkoku 確定申告).
For Dividends paid on Japanese Securities by Japanese Entities through Japanese Brokers, Tax will be withheld at 20.315% (15% National, 5% Residential, and 0.315% Reconstruction Tax). You will receive a Gensenchosu 源泉徴収票 From the Japanese Broker, which you will enter into the Kakutei Shinkoku 確定申告 for credit. You have to file a Tax Return if the total amount of the dividends exceeds than Y200,000.
You can choose to File either 2. or 3. below. See the Benefit Analysis Below (2.1)
2. Aggregate Taxation - Form-B Pages 1&2
or
3. Separate Self Assessment Taxation - Form-B Pages 1&2 & Page 3
2. Aggregate Taxation - Form-B Pages 1&2
2.1 You would file your Gensenchosu 源泉徴収票 Dividends and they would be taxed at your Marginal Tax Rate, but for qualified Japanese instruments you can claim a Dividend Credit (Page 1- Item 36)
For total Dividends under Y10M the Dividend Credit is 10%, and for any Dividends exceeding Y10M, the Dividend Credit is 5%.
(it doesn't like tabs...)
Marginal Rate --- National (+ve) --- Residential --- Total (Approx) --- Plus Reconstruction Tax
5% ---- 5-10 = 0% --- 0% --- 0%
10% --- 10-10 = 0% --- 0% --- 0%
20% --- 20-10 = 10% --- 10x10/20 = 5% --- 15%
23% --- 23-10 = 13% --- 10x13/23 = 5.6% --- 18.6% (Less than 20%)
33% --- 33-10 = 23% --- 10x23/33 = 6.7% --- 29.7% (More than 20%)
40% --- 40-10 = 30% --- 10x32/40 = 7.5% --- 37.5%
45% --- 45-10 = 35% --- 10x35/45 = 8% --- 43%
As you can see, if you are a Retiree with very little income and your total Taxable Income including the Dividends is somewhere between Y6.95M and Y9M then it would be better to opt for Aggregate Taxation. If over about Y8M, then it would be better to opt for Separate Self Assessment Taxation.
However, Dividend Tax Credit cannot be used for Foreign Dividends and non-qualified Dividends, so the numbers would not be so good.
Marginal Rate --- National --- Residential --- Total (Approx) --- plus Reconstruction Tax
5% --- 5% --- 10% --- 15%
10% --- 10% --- 10% --- 20% (Less than 20%)
20% --- 20% --- 10% --- 30% (More than 20%)
23% --- 23% --- 10% --- 33%
33% --- 33% --- 10% --- 43%
40% --- 40% --- 10% --- 50%
45% --- 45% --- 10% --- 55%
As you can see, if you are a Retiree with very little income and your total Taxable Income including the Dividends is somewhere between Y3.3M and Y6.95M then it would probably be better to opt for Aggregate Taxation. If over about Y6M, then it would be better to opt for Separate Self Assessment Taxation.
Against this, you can take a Foreign Tax Credit for Foreign Taxes Withheld at Source. You should receive a Notification Of Taxes Withheld from your Foreign Broker, such as a US Form 1042-S or 1040. See Tax Treaties below.
Otherwise, it is better to opt for 3. Separate Self Assessment Taxation for Dividends
National --- Residential --- Total
15% --- 5% --- 20% --- plus Reconstruction Tax 0.315%
As you can see, if you are a Retiree with income other than this Dividend Income of more than a little over Y3.3M, then this is the more tax effective option.
Against this, you can claim the Tax Credit for the Japanese Taxes withheld (Gensenchosu 源泉徴収票 From the Japanese Broker) and take a Foreign Tax Credit for Foreign Taxes Withheld at Source. You should receive a Notification Of Taxes Withheld from your Foreign Broker, such as a US Form 1042-S or 1040. See Tax Treaties below.
These numbers are approximate assuming the Dividend Income does not cause you to move up a tax bracket. You would have to do the exact calculation for your balance of non-Dividend Income and Dividend Income.
Once you have selected the Aggregate or Separate Self Assessment Taxation method for a particular year, you cannot go back and change it in a filing amendment.
Tax Treaties
On Foreign Tax Credit for Foreign Taxes Withheld at Source.
Local Taxation Rules will vary according to Jurisdiction.
The Standard rate of Withholding in the US is 30%.
Yes, If your dividends are earned in the US you are subject to 30% US Tax on those US Earnings..
Dividends may be taxed at source by Withholding in the country where they are paid.
It may be possible to reduce the rate of Withholding Tax if there is a Tax Treaty existing between that country and your country of residence.
e.g. between US and Japan. The Standard rate of Withholding in the US is 30%.
However, Under Article 10, Paragraph 2 (b) of the US-Japan Tax Treaty you can claim a reduced Withholding rate on Dividend Income of 10% in the US. This tax is paid to the US government.
The US-Ireland Tax Treaty allows Irish residents to reduce their US Withholding rate to 15% in the US.
Tax Treaties exist between many nations and you should check on government websites for those countries.
If you have US securities and they are subject to Withholding Tax in the US, you should receive a For 1042-S or 1040 Statement Of Taxes Withheld from your Broker before April 15th.. This is the US equivalent of Gensenchosu 源泉徴収票.
If you file a W8-BEN claiming the reduced rate of Withholding on Dividends under the relevant Tax Treaty, they will reduce the rate withheld.
You can use this 1042-S as proof of Foreign Taxes paid, and claim a Foreign Tax Credit (Page 1 - Item 46)
Unfortunately it arrives too late for the Japan Filing Deadline of March 14th., so unless you can download it directly from your Broker's website, you will have to submit your Japanese Taxes with the Dividend Gross Value, and then go back and amend the Form, and enter Page 1 - Item 46 - Foreign Tax Credit after you receive the documents from your broker.
I went through to confirm the Intricate Detail of Dividend Taxation in Japan.
You can select one of three methods for Taxation of Dividends:
1. For Dividends paid on Japanese Securities by Japanese Entities through Japanese Brokers, Tax will be withheld at 20% + Reconstruction Tax 0.315%. Since this is the Dividend Tax Rate, you would not need to file a Tax Return if the total amount of the dividends is less than Y200,000. You will receive a Gensenchosu 源泉徴収票 From the Japanese Broker. You cannot use this for Foreign Stocks as no Japanese Tax will have been withheld.
or
You can File a Year End Tax Return (Kakutei Shinkoku 確定申告).
For Dividends paid on Japanese Securities by Japanese Entities through Japanese Brokers, Tax will be withheld at 20.315% (15% National, 5% Residential, and 0.315% Reconstruction Tax). You will receive a Gensenchosu 源泉徴収票 From the Japanese Broker, which you will enter into the Kakutei Shinkoku 確定申告 for credit. You have to file a Tax Return if the total amount of the dividends exceeds than Y200,000.
You can choose to File either 2. or 3. below. See the Benefit Analysis Below (2.1)
2. Aggregate Taxation - Form-B Pages 1&2
or
3. Separate Self Assessment Taxation - Form-B Pages 1&2 & Page 3
2. Aggregate Taxation - Form-B Pages 1&2
2.1 You would file your Gensenchosu 源泉徴収票 Dividends and they would be taxed at your Marginal Tax Rate, but for qualified Japanese instruments you can claim a Dividend Credit (Page 1- Item 36)
For total Dividends under Y10M the Dividend Credit is 10%, and for any Dividends exceeding Y10M, the Dividend Credit is 5%.
(it doesn't like tabs...)
Marginal Rate --- National (+ve) --- Residential --- Total (Approx) --- Plus Reconstruction Tax
5% ---- 5-10 = 0% --- 0% --- 0%
10% --- 10-10 = 0% --- 0% --- 0%
20% --- 20-10 = 10% --- 10x10/20 = 5% --- 15%
23% --- 23-10 = 13% --- 10x13/23 = 5.6% --- 18.6% (Less than 20%)
33% --- 33-10 = 23% --- 10x23/33 = 6.7% --- 29.7% (More than 20%)
40% --- 40-10 = 30% --- 10x32/40 = 7.5% --- 37.5%
45% --- 45-10 = 35% --- 10x35/45 = 8% --- 43%
As you can see, if you are a Retiree with very little income and your total Taxable Income including the Dividends is somewhere between Y6.95M and Y9M then it would be better to opt for Aggregate Taxation. If over about Y8M, then it would be better to opt for Separate Self Assessment Taxation.
However, Dividend Tax Credit cannot be used for Foreign Dividends and non-qualified Dividends, so the numbers would not be so good.
Marginal Rate --- National --- Residential --- Total (Approx) --- plus Reconstruction Tax
5% --- 5% --- 10% --- 15%
10% --- 10% --- 10% --- 20% (Less than 20%)
20% --- 20% --- 10% --- 30% (More than 20%)
23% --- 23% --- 10% --- 33%
33% --- 33% --- 10% --- 43%
40% --- 40% --- 10% --- 50%
45% --- 45% --- 10% --- 55%
As you can see, if you are a Retiree with very little income and your total Taxable Income including the Dividends is somewhere between Y3.3M and Y6.95M then it would probably be better to opt for Aggregate Taxation. If over about Y6M, then it would be better to opt for Separate Self Assessment Taxation.
Against this, you can take a Foreign Tax Credit for Foreign Taxes Withheld at Source. You should receive a Notification Of Taxes Withheld from your Foreign Broker, such as a US Form 1042-S or 1040. See Tax Treaties below.
Otherwise, it is better to opt for 3. Separate Self Assessment Taxation for Dividends
National --- Residential --- Total
15% --- 5% --- 20% --- plus Reconstruction Tax 0.315%
As you can see, if you are a Retiree with income other than this Dividend Income of more than a little over Y3.3M, then this is the more tax effective option.
Against this, you can claim the Tax Credit for the Japanese Taxes withheld (Gensenchosu 源泉徴収票 From the Japanese Broker) and take a Foreign Tax Credit for Foreign Taxes Withheld at Source. You should receive a Notification Of Taxes Withheld from your Foreign Broker, such as a US Form 1042-S or 1040. See Tax Treaties below.
These numbers are approximate assuming the Dividend Income does not cause you to move up a tax bracket. You would have to do the exact calculation for your balance of non-Dividend Income and Dividend Income.
Once you have selected the Aggregate or Separate Self Assessment Taxation method for a particular year, you cannot go back and change it in a filing amendment.
Tax Treaties
On Foreign Tax Credit for Foreign Taxes Withheld at Source.
Local Taxation Rules will vary according to Jurisdiction.
The Standard rate of Withholding in the US is 30%.
Yes, If your dividends are earned in the US you are subject to 30% US Tax on those US Earnings..
Dividends may be taxed at source by Withholding in the country where they are paid.
It may be possible to reduce the rate of Withholding Tax if there is a Tax Treaty existing between that country and your country of residence.
e.g. between US and Japan. The Standard rate of Withholding in the US is 30%.
However, Under Article 10, Paragraph 2 (b) of the US-Japan Tax Treaty you can claim a reduced Withholding rate on Dividend Income of 10% in the US. This tax is paid to the US government.
The US-Ireland Tax Treaty allows Irish residents to reduce their US Withholding rate to 15% in the US.
Tax Treaties exist between many nations and you should check on government websites for those countries.
If you have US securities and they are subject to Withholding Tax in the US, you should receive a For 1042-S or 1040 Statement Of Taxes Withheld from your Broker before April 15th.. This is the US equivalent of Gensenchosu 源泉徴収票.
If you file a W8-BEN claiming the reduced rate of Withholding on Dividends under the relevant Tax Treaty, they will reduce the rate withheld.
You can use this 1042-S as proof of Foreign Taxes paid, and claim a Foreign Tax Credit (Page 1 - Item 46)
Unfortunately it arrives too late for the Japan Filing Deadline of March 14th., so unless you can download it directly from your Broker's website, you will have to submit your Japanese Taxes with the Dividend Gross Value, and then go back and amend the Form, and enter Page 1 - Item 46 - Foreign Tax Credit after you receive the documents from your broker.