Japan Tax Reporting of U.S Mutual Funds

[unagipants69]

Long time lurker, first-time poster. Thank you all for the mountain of valuable information here!

Hopefully some easy questions -- I'm in the middle of doing my Kakutei Shinkoku 確定申告 (Tax Return in Japan). It's the first time I'm having to deal with my foreign-held investments' dividends 配当所得 and capital gains 譲渡所得. The particular investment vehicle is a standard, taxable account holding mutual funds (American Funds).

You guessed right, I'm a U.S. citizen - and my U.S. taxes are just fine. For the sake of simplicity, I'll omit anything about tax credits.

What I'm trying to understand is, how to report this on the Kakutei Shinkoku?

For regular capital gains, I'm using the e-tax site to help me, which is feeding me Form B, and also Page-3 for separate taxation (分離課税用). I'm having trouble on deciding how to classify my mutual funds (example: AGTHX). Is this a "listed stock / 上場株式", or an "other-than-listed stock / general stock / 一般株式"? It's certainly not a private investment, so I'm lost here.

The tax site says that regular stocks on the market and ETFs are "listed stocks", but I can't see anything specific about mutual funds:
https://www.keisan.nta.go.jp/r2yokuaru/ ... shiki.html

I presume my U.S. held mutual funds are "listed stock /上場株式", since the holdings are mostly listed equities (also very little cash and bonds). Since the mutual fund can be purchased from generally any broker (not just American Funds), perhaps that can make this a "listed stock" as well?

For reference:
https://www.capitalgroup.com/individual ... fund/agthx

Interestingly, when I asked at my local tax office, the (young) lad told me "since these are not Japanese stocks, you must report them as 'general / unlisted stocks'". He had to go ask his sempai for that info, so didn't seem confident in his answer.

For dividends and capital gains distributions, same thing. I've gone with "listed stocks / 上場株式等の配当等に関する事項", instead of "unlisted stocks / 非上場株式等（「上場株式等」以外のもの）の配当等に関する事項". Is this right?

https://www.keisan.nta.go.jp/r2yokuaru/ ... haito.html

BONUS QUESTION: Is there a limit of dividends / capital gains that do not have to be reported to the Japanese Tax Agency? i.e. if it was only 30,000 JPY for all assets for the whole year?

[dcon]

Did you sell stocks and/or mutual funds or are you just talking about dividends and long term cap gains on your existing holdings?

[unagipants69]

both.

I've got a 1099-DIV from my broker, in addition to a 1099-B.

1099-DIV has the dividend distributions and capital gains distributions (no selling action on my part; broker sells for various reasons / fees / turnover / etc.).

1099-B has capital gains from me selling some of the fund(s).

Both contain short and long term capital gains (in Japanese-terms, meaning some of it is >5 years old, some is shorter than that, which I have a record of).

[captainspoke]

Anything that would be on a 1099-DIV I count as a distribution (as 配当金), but instead of waiting for that I keep track thru the year. I keep a simple spreadsheet and list distributions by date, 1/1 thru 12/31.

Besides the date, I add a column for ticker symbol (payer of the distribution), then a column for the amount in dollars. Next column is the TTM rate for the date concerned (look here: http://www.murc-kawasesouba.jp/fx/past_3month.php and scroll to below the calendars to input any date). Next column does the math, converting $ to ¥ for that TTM rate. Then total the yen figures at the bottom. (If there is no TTM rate for the date you want, step back by a day at a time till you get a rate.)

Pretty this spreadsheet up a little, with ID info as a header--name, address, contact phone, tax number, my number, year that it is for, and so on. Since you turn this in with your tax return.

**

There are a couple ways of reporting distributions, but I'm not comfortable explaining that--I don't have a competent grasp of it. (So all the following is "I think...") The two cent summary is that one way divvies are added to and taxed as income (so at the rate for your income level), whereas the other way they are taxed as dividends. This seems unrelated to your question about listed/unlisted stocks. (And I'm not at all an expert on this so take this with that caution in mind.)

[niall24]

My opinions/experience (not professional advice):

divs or capital gains in Japan (for me, that means Rakuten shoken) are taxed at source, nothing for me to do.
My divs or gains from InteractiveBrokers and other funds overseas that I sell (i.e., that make a *real* gain or loss, not paper one) are all classified by my tax accountant as general income, so as far as I know, they just get added to my other income sources to get total income. Tax rates etc are based on that.

>>BONUS QUESTION: Is there a limit of dividends / capital gains that do not have to be reported to the Japanese Tax Agency? i.e. if it was only 30,000 JPY for all assets for the whole year?

If you are a "salaried worker", you only *have to make a declaration* if you receive more than 200k yen a year.

[ichiokuen]

Hi Niall,

Did you eventually find out how to do this? I followed captainspoke's advice last year and made a pretty spreadsheet showing every dividend and stock trade, but this year I sold a large amount of stocks so thought it would be better to pay the US gov first and use the tax credits to reduce my Japan taxes(to avoid double taxation).

Problem for me is I don't see anywhere to use the US tax credits. I am using the accounting software Freee, which is great, but it offers no help for foreign based capital gains or dividends.

Please let me know if anyone else has come across this quirk.

Thanks!

[TokyoWart]

Problem for me is I don't see anywhere to use the US tax credits. I am using the accounting software Freee, which is great, but it offers no help for foreign based capital gains or dividends.

My experience is you report foreign taxes paid on capital gains and dividends on 外国税額控除に関する明細書 and for the US the amount you report is 10% of the gain or dividend, not the actually amount paid (because of the Japan-US tax treaty).

[ichiokuen]

Thanks so much TokyoWart!
It's mind boggling how hard they make it to give the tax office my money! So little information available. Hopefully, I can file the 外国税額控除に関する明細書 by e-tax, because I want that extra 100,000yen exclusion.

[unagipants69]

# Renamed the title of this post for clarity

I think I got this figured out. Seems the young lad at the tax office may have been right after all. Here's a summary of what I ended up doing this year for all my foreign assets:

# 1099-INT for my regular checking account in a U.S. bank.
1. Reported as foreign interest on foreign held bank account:
国外で支払われる預金等の利子など国内で源泉徴収されないもの等に関する事項（総合課税の対象）
2. When doing the USD to JPY conversion, I used the TMM rate and date for each transaction. I then simply added them all up in their JPY format and reported that.
3. The 1099-INT actually ended up being useless since I had to do manual calculations on Excel. It's only useful for double checking your numbers (totals for the year in USD).

# 1099-DIV, for dividends and captigal gains distributions from U.S. mutual funds (American Funds)
1. Reported as "dividends from unlisted stocks", NOT listed stocks!
非上場株式等（「上場株式等」以外のもの）の配当等に関する事項
2. I calculated this the same way I did the 1099-INT, going back to each day of 2020 where I actually got the dividend / capital gain distribution, made a new column for the TMM date and value. I reported only one value for each mutual fund, which combines the transactions of both dividends and capital gains distributions. I called it "distributions" or 分配金 in the 種目 field. Some mutual funds had foreign taxes paid on it, so I simply reported that on the same page where it applied (通知外国税相当額), again using the TMM rate of the day it was paid.
3. Again, the 1099-DIV was useless here as well since I did all manual calculations. Like the 1099-INT, It's only useful for double checking your numbers (totals for the year in USD).

# 1099-B, for U.S. mutual funds that I sold (American Funds)
1. Reported as "sale of general stocks", NOT listed stocks!
一般株式等の売却がある。
2. The 1099-B was not exactly useless, but made things complicated with "covered shares" and "non covered shares". Combine that with different definitions of short/long term capital gains (affecting your cost basis), and this one got complicated real fast. I essentially needed to re-calculate the cost basis in the most efficient (and accurate) manner.
3. First thing I did was download all transactions for the last 10 years since I held those funds. I should be thankful I was able to do that!
4. Next, using Excel, I added new columns for (U.S. L/S) and (JP L/S), L/S meaning long or short term capital gains.
5. Then, in a separate table, I transferred the 1099-B numbers.
6. On my new 1099-B table (in Excel), I added two groups of columns: one group which calculates the new cost-basis in USD, the other group of columns to convert those numbers into JPY using the TMM of the "date sold".
7. Finally, I was able to use this info to report the shares I sold (which I rounded to whole numbers since the e-Tax form doesn't allow decimals) and all the other required info on the form.

# About the covered/non-covered shares issue.
That applies to mutual funds (I guess) pre-2012. So I had 3 different cost-basis calculations done by American Funds: short-term, long-term (up to 2012), and long-term NCS (non-covered shares) for pre-2012. Ugh, complicated. In Japan, it was just short term (<5 years) and long-term (>5 years).

NCS reference

# Implications
1. 1099-INT Interest was reported using the "aggregate taxation" method, or 総合課税, as expected.
2. 1099-DIV dividends and capital gains distributions were reported using the "aggregate taxation" method, or 総合課税. This is because I reported them as "unlisted" stock, which forces this taxation method. Good news is that I seem to be able to apply the "dividend credit", since it wasn't much (this credit cannot be used if you use the separate taxation method).
3. 1099-B capital gains were reported using the "separate taxation" method, or 申告分離課税, as expected.

# What to send
The lad at the tax office told me I do not need to send them any U.S. forms or papers about the reported income, but just to keep the records just in case I get audited. Might not be the same for you, perhaps it depends on "how much" income was reported and how big my assets were, so be sure to check.

# Summary
This was quite the learning experience. I've been in Japan for 8 years, but it was the first time I sold shares in nearly 10 years. Very complicated at first to get through, but I think the years ahead will be much easier.

[ichiokuen]

Thanks for the very detailed post! This will help a lot of people.

Are you going to use the form 1116 to claim tax credits? Or did you claim tax credits in Japan?

Thanks again.