Obligatory disclaimer that I am not a tax professional, so take everything I say with a grain of salt. Appreciate if others correct me when I'm saying something wrong.
Spa06Jc wrote: ↑Fri Nov 27, 2020 1:03 am
Do you know where I can find more detail on how exactly to file taxes for the dividends earned in a US brokerage?
I read somewhere on the forum that you may only need to claim dividends/cap gains the year you remit money back to Japan, but have a feeling that's not right.
So, the situation might vary depending on how long you've been in Japan. If you're a permanent tax resident I am 100% positive that this statement is false, but if you're not a permanent tax resident then this might be correct. Note that being a permanent tax resident is not the same as what is on your visa. The rule is below:
A permanent resident is a resident who is a Japanese national, or who has a living base in Japan or resided in Japan for a period of more than 5 years in the last 10 years. A permanent resident is subject to income tax on worldwide income regardless of source.
(source:
https://home.kpmg/xx/en/home/insights/2 ... rders.html )
I can only speak for myself as a permanent tax resident (been in Japan for more than 5 years over the past 10 years): tax is on worldwide income, and when you repatriate the money to Japan is irrelevant. For dividends, as far as I know, you can choose to either consider them as normal income (add them to your salary), or fill them in a separate taxation form along with capital gain.
My tax folks have told me that once you choose, you cannot change that choice in the following years. For me, they have decided to file it along with capital gains, I am not entirely sure why (lower tax rate probably), but that's what I do now. This document has some details, the entirety of section 3 is probably useful, but on dividends it's on page 89.
https://assets.kpmg/content/dam/kpmg/jp ... 201911.pdf
To declare the dividends, you have to file an additional form called "separate taxation", which is here:
https://www.nta.go.jp/taxes/shiraberu/s ... r02/03.pdf
The ト section is where you put the dividends. How my tax preparers calculated it is as follows:
- every time I received a dividend, check the USD/JPY rate on that day to convert in yen. (for example if I received $500 in dividends on 1st of July, they check the JPY rate on July 1st, let's imagine it was 110 - I'm making this up - then they would say on July 1st I received 55'000 yen)
- They do the same for every 10% tax withholding (in my example above, $50 is withheld on July 2nd, let's assume that day the rate was 111, so they calculate that I paid 5550 yen in US witholding taxes)
- after conversion to JPY, they added all dividends, and subtracted all taxes(the 10% US withholdings, I mean). That's my result, that they wrote in that "ト " section. I believe there might be more precise ways to go about it, such as putting only the dividends in that section, and the taxes in a "cost" section, but at the end of the day, it's a matter of declaring what I receive, and making sure the 10% US tax witholding is not declared as money that went in my pocket. (Note how it is not declared as tax credit in my case, however)
Once you're done with that form, which includes realized capital gain as well (if you sold anything), there's a bit of magic involved in calculating the final result to report it back to your main tax form. To me the difficulty is not in calculating/reporting the dividend tax itself, but merging that back with the main tax form.
The whole process, as far as I can tell, is described here:
https://www.nta.go.jp/taxes/shiraberu/s ... /index.htm
Also, on your first point, why did your tax guys recommend not claiming the credits?
Basically according to the law you can claim credits for the withheld dividend tax on individual company stocks. My tax guys (well established company PWC) said that index funds and ETFs are not technically "individual company stock" and that therefore claiming credit on the tax withheld on these dividends is gray area. Basically from their perspective if I owned say some Coca Cola stock and it paid me dividends on my US broker, then the broker withholds tax on that, I can claim that tax as foreign credit. But the same scenario on an index ETF does not pass as a "normal" company dividend from their perspective, and therefore is not eligible for the credit. Don't quote me on this, this is my interpretation of what they told me.
I was planing to go to the tax office to outline my situation and see what they suggest - is that a good move, or do I risk being sucked into the Japanese bureaucracy void where nobody knows what they're talking about and I end up being told contradictory things?
I think it is always a good move. Not only are they reasonably knowledgeable, I've heard they keep track of such questions and what they answered to you, and you can use that as additional proof in case of audit or whatnot, that you did things according to their suggestions.
I've researched in many places, but so far nobody has been able to explain to me how the tax part works for whom:
, hope you understood. Thank you.
