Japan Tax Office wants me to file Japanese tax return first before filing U.S. tax return

[Tkydon]

I was also told that I cannot receive a tax credit for US taxes that I paid.

captainspoke mentioned this above, but I have the same understanding that as Japan has primary taxation rights you should be paying taxes to Japan, and using foreign tax credits to alleviate taxation on the US side. So the issue was that you were trying to do the opposite?

No, As a Resident of Japan, Japan has first call on your income, and taxes paid in the US on US Sourced income can be claimed as a Foreign Tax Credit against tax on the same income in Japan.

Japan has first call, and taxes paid in Japan on Japan Sourced income can be claimed as a Foreign Tax Credit against tax on the same income if it is taxed in the US.

In Booyah's case, each income category is only taxable in one location, so there is no double taxation, so no Foreign Tax Credits apply.

[captainspoke]

...
(1) No, Japan has primary call, and taxes paid in the US on US Sourced income can be claimed as a Foreign Tax Credit against tax on the same income in Japan.

(2) Japan has primary call, and taxes paid in Japan on Japan Sourced income can be claimed as a Foreign Tax Credit against tax on the same income if it is taxed in the US, such as the FEIE...

(3) In Booyah's case, each income category is only taxable in one location, so there is no double taxation, so no Foreign Tax Credits apply.

(1) seems congruent with my understanding. (2), too, tho pensions are not earned income, so I don't think the FEIE has anything to do with this.

But could you elaborate a little on (3)--how does that work? I would have expected the two pension incomes to be taxable here.

[Tkydon]

...
(1) No, Japan has primary call, and taxes paid in the US on US Sourced income can be claimed as a Foreign Tax Credit against tax on the same income in Japan.

(2) Japan has primary call, and taxes paid in Japan on Japan Sourced income can be claimed as a Foreign Tax Credit against tax on the same income if it is taxed in the US, such as the FEIE...

(3) In Booyah's case, each income category is only taxable in one location, so there is no double taxation, so no Foreign Tax Credits apply.

(1) seems congruent with my understanding. (2), too, tho pensions are not earned income, so I don't think the FEIE has anything to do with this.

But could you elaborate a little on (3)--how does that work? I would have expected the two pension incomes to be taxable here.

Article 17 - State Pensions and Annuities - Social Security (or Japanese National Pension) taxable only in the country of Residence.
vs
Article 18 - Government Pensions paid by any level of Government (Retired Government Workers, Military, Teachers, Diplomats, Embassy Staff, etc.) - Taxable only in the country paying the Government Pension, unless the recipient is a Citizen of the Country of Residence, which I assume Booyah is not (a Japanese Citizen).

Please see both quotes directly from the Treaty above.

Sorry, bad wording. I shouldn't have included the words about the FEIE...

A Foreign Tax Credit can be claimed if US taxes were payable (by US Citizens resident in Japan) on Japan Sourced income that had already been taxed in Japan, to avoid paying Double Tax on the same income.

'avoid paying Double Tax' does not mean 'being taxed in only one location or the other'.
It means 'paying the Total Tax that would be payable in the higher tax jurisdiction, whilst some of that may be payable in the other jurisdiction, in accordance with the Tax Treaty, in which case a Tax Credit is claimed for the tax paid in the other jusrisdiction on the income sourced in the other jurisdiction, so that the sum of all taxes does not exceed the Total Tax that would be payable on the same income in the higher tax jurisdiction.

[YouMeWeThem]

What does "primary call" mean in this case? Google's not helping me out.

[Tkydon]

What does "primary call" mean in this case? Google's not helping me out.

If you live in Japan, you have to file your taxes in Japan on the Gross Income.

As a resident of Japan, Japan has the right to tax virtually all of your income, depending on length of stay, and the Tax Treaty with the other country.

[booyah]

3. Bank interest - only taxable in Japan

I assume this is referring only to interest in a Japanese bank account since I believe it is already taxed before it is posted in my account. Is that correct?

[booyah]

1. US Social Security - only taxable in Japan

"ARTICLE 17
1. Subject to the provisions of paragraph 2 of Article 18, pensions and other similar remuneration, including social security payments, beneficially owned by a resident of a Contracting State shall be taxable only in that Contracting State."
2. Teacher Pension from California - If this is a Government Paid Pension for service to the California State Government, paid by the State or School District - Only Taxable in the US, if Booyah is not a Japanese Citizen.

Referring to Article 17 #1
Are you saying that my U.S. Social Security is not taxable in the US?

Referring to Article 17 #2
My teacher pension is from CalSTRS, so it is not taxable in Japan? The man at the Tax Office said he didn’t know about this. How about a pension from the University of California? Would that be taxable in Japan? I don’t think the Japan Tax Office will believe me unless I show them something official in writing.

[Tkydon]

I go back to the first response I wrote:

You listed three sources of income, and I addressed each sparately:

Under the Japan US Tax Treaty:
https://www.irs.gov/businesses/internat ... -documents
https://www.mof.go.jp/tax_policy/summar ... _ST_en.pdf


1. US Social Security - taxable in Japan

"ARTICLE 17
1. Subject to the provisions of paragraph 2 of Article 18, pensions and other similar remuneration, including social security payments, beneficially owned by a resident of a Contracting State shall be taxable only in that Contracting State."


Paragraph 2 of Article 18 specifically excludes Government Service Pension from the provisions of Article 17, and pushes it to Article 18. See below.

"pensions and other similar remuneration, including social security payments, beneficially owned by a Resident of a Contracting State (Japan) shall be taxable only in that Contracting State (Japan)." -
You are Resident in Japan, so your social security payments are taxable in Japan.


Further, US Social Security qualifies for the Public Pension Tax Deduction, which gives you about an additional Y1+M of Tax Deduction on top of other allowances and deductions.

Best reference is here - Page 8 (page 12 of the PDF)
Calculating the Public Pension Plan Deduction (Calculation Table)
https://www.tax.metro.tokyo.lg.jp/book/ ... k2023e.pdf

Also here - Bottom of Page 22 (under 65) and top of Page 23 (over 65)
https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf

So, You get your Base Deduction of Y480,000, maybe Spouse Deduction Y380,000 if your spouse is dependent and not working, or only working part-time and earning less than Y480,000 per year, Household National Health Care Premium Deduction, Healthcare Costs over Y100,000 Deduction, (any dependent children or parents?), any other Insurance Premiums (health, life, earthquake, etc.), any other Deductions or Allowances PLUS the Y1+M Public Pension Deduction.

Your Social Security Pension should be completely Tax Free in the US, so the only tax you will pay is in Japan after all these allowances and deductions...


2. Teacher Pension from California -
If this is a Government Service Pension for service to the California State Government, paid by the State or School District - Only Taxable in the US, if you are not a Japanese Citizen...

"ARTICLE 18
...
2. (a) Any pension and other similar remuneration paid by, or out of funds to which contributions are made by, a Contracting State or a political subdivision or local authority thereof to an individual in respect of services rendered to that Contracting State or a political subdivision or local authority thereof, other than payments made by the United States under provisions of the social security or similar legislation, shall be taxable only in that Contracting State.
(b) However, such pension and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that other Contracting State."

"other than payments made by the United States under provisions of the social security or similar legislation" - pushes your Social Security Pension back to Article 17, discussed above.

"Any pension...paid by...by a Contracting State (US) or a political subdivision or local authority...in respect of services rendered to that Contracting State (US) or a political subdivision or local authority thereof... shall be taxable only in that Contracting State (US).
unless
"...such pension...shall be taxable only in the other Contracting State (Japan) if the individual is a Resident of, AND a National of that other Contracting State (Japan)."

I assume you are not a Japanese National, so Paragraph 2(a) refers. - Not taxable in Japan.


3. Bank interest - taxable in Japan

"ARTICLE 11
1. Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed only in that other Contracting State."


Interest arising in a Contracting State (US) and beneficially owned by a resident of the other Contracting State (Japan) may be taxed only in that other Contracting State (Japan)."


However, if you are still Non-Permanent Resident for Tax Purposes, having been in Japan for less than 5 years in the last 10 years, only funds remitted to Japan from the Social Security and Bank Interest Income are taxable in Japan.
Social Security and Bank Interest Income would be considered to have been the funds remitted to Japan, and taxable, before the Teacher's Pension, non-taxable.

[captainspoke]

...

Best reference is here - Page 8 (page 12 of the PDF)
Calculating the Public Pension Plan Deduction (Calculation Table)
https://www.tax.metro.tokyo.lg.jp/book/ ... k2023e.pdf

Also here - Bottom of Page 22
https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf

So, You get your Base Deduction of Y480,000, maybe Spouse Deduction Y380, National Health Care Premium Deduction, Healthcare Costs over Y100,000 Deduction, (any dependent children or parents?), any other Deductions or Allowances PLUS the Y1+M Public Pension Deduction.
...

Sorry to bug you, but those two links are not coming thru properly (ends/final parts of the addresses are not being included in the link), and I'm interested in this--like maybe my tax filing needs amending.

Not sure why they're not coming thru (perhaps just pasted in?), maybe the URLs need to be between bracketed url and /url, like you get when clicking on the link icon above the message posting frame?

[Tkydon]

...

Best reference is here - Page 8 (page 12 of the PDF)
Calculating the Public Pension Plan Deduction (Calculation Table)
https://www.tax.metro.tokyo.lg.jp/book/ ... k2023e.pdf

Also here - Bottom of Page 22
https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf

So, You get your Base Deduction of Y480,000, maybe Spouse Deduction Y380, National Health Care Premium Deduction, Healthcare Costs over Y100,000 Deduction, (any dependent children or parents?), any other Deductions or Allowances PLUS the Y1+M Public Pension Deduction.
...

Sorry to bug you, but those two links are not coming thru properly (ends/final parts of the addresses are not being included in the link), and I'm interested in this--like maybe my tax filing needs amending.

Not sure why they're not coming thru (perhaps just pasted in?), maybe the URLs need to be between bracketed url and /url, like you get when clicking on the link icon above the message posting frame?

This platform truncates URLs... I copied and pasted and didn't Quote myself
I edited them

This platform also does not honor tabs so tables get all messed up, otherwise I would post the table instead of the link -)