IRA proceeds question -> “taxation of remitted income”
Posted: Thu Oct 31, 2019 11:03 pm
(First time poster on this board. I could not find answers on previous posts)
If during the first 5 years, an American non-permanent resident living in Japan draws down a ROTH IRA and SEP IRA (self employed pension) and pays US Federal Tax on the SEP. If after that, the non-permanent resident transfers that money to their personal account in Japan, the Japanese bank will ask the purpose of the funds transfer, to which the resident will reply, “savings”. Within this scenario, is the non-permanent resident subject to remittance or Income tax by the Japanese authorities?
I’ve heard differing opinions from local tax professionals:
One opinion: "it’s savings they don’t tax savings transferred in the first 5 years"
One opinion: "Japan will tax, but file with IRS the following year, requesting a foreign tax credit on
foreign taxes paid, but you will ultimately pay the higher of the two taxes, ultimately Japan’s rate."
If the second opinion is true, then the individual would receive 100% credit on taxes paid for the ROTH amount(s) because that should never have been taxed in the first place; or is that a moot point? What would be the basis of credit on the ROTH?
If during the first 5 years, an American non-permanent resident living in Japan draws down a ROTH IRA and SEP IRA (self employed pension) and pays US Federal Tax on the SEP. If after that, the non-permanent resident transfers that money to their personal account in Japan, the Japanese bank will ask the purpose of the funds transfer, to which the resident will reply, “savings”. Within this scenario, is the non-permanent resident subject to remittance or Income tax by the Japanese authorities?
I’ve heard differing opinions from local tax professionals:
One opinion: "it’s savings they don’t tax savings transferred in the first 5 years"
One opinion: "Japan will tax, but file with IRS the following year, requesting a foreign tax credit on
foreign taxes paid, but you will ultimately pay the higher of the two taxes, ultimately Japan’s rate."
If the second opinion is true, then the individual would receive 100% credit on taxes paid for the ROTH amount(s) because that should never have been taxed in the first place; or is that a moot point? What would be the basis of credit on the ROTH?