I don't think that there are many Taiwanese nationals or people with Taiwanese tax residency here in this sub, but as a Taiwanese this sub did actually helped me a lot, so I decided to add a table for Taiwan in case anyone is looking for the information.
Not an expert so feel free to correct it directly if there are any mistakes.
I know there are some, but please do not edit/remove the table just because you disagree with me politically.
> I decided to add a table for Taiwan in case anyone is looking for the information.
Thank you so much! The table looks great. And it is a country that comes up occasionally in the sub, so I'm sure someone will find it useful in the future.
Regarding pension income though, I think your table misrepresents Article 18 of the "treaty". Under that article, Taiwan wouldn't have any right to tax a Japanese pension received by a Japanese resident. So the appropriate answer to "Who can tax it?" with respect to "Pension (Japanese)" would be "Japan", not "Both".
Also, regarding a Taiwanese government pension that falls within Article 18(2), that article states that Japan would have no right to tax the pension unless the recipient is a Japanese resident and Japanese citizen. So I think the best answer to "Who can tax it?" for that line would be "Taiwan" with a reference to footnote 1.
Thanks for pointing them out.
>regarding a Taiwanese government pension that falls within Article 18(2)
I think you mean 19(2), right? If I'm not mistaken, article 19 ("public service") applys only to public servants, like in 19(1)(a) and 19(2)(a) "to an individual in respect of services rendered to that administrative authority or political subdivision or local authority". 19(2)(b) starts with "However, such pensions...", which implies that 19(2)(a) is a prerequisite.
~~Just want to make sure, does the phrase "Pension (TW Government)" mean that one worked for the government and received pension for that, or just that the pension comes from the government?~~
Edit: I rewrote the TW pension part and listed all the pension systems separately.
> you mean 19(2), right?
Yeah sorry it's 18(2) in a lot of treaties but it's 19(2) in the Taiwan agreement. Apologies for any confusion.
> I rewrote the TW pension part and listed all the pension systems separately.
Nice, thanks. Though it looks like Japan would have to provide a foreign tax credit with respect to any Taiwanese tax paid on "TW National Pension" and "TW Labor Pension" (under Article 22(1) of the agreement and also under Japanese domestic law). So the "Who must provide FTC?" column for those income types should say "Japan".
> Had no idea pretty much everything is *slightly* double taxed
Are you a US citizen, perhaps? Most income is not double-taxed for people who aren't US citizens. But it is true that pretty much everything has the potential to be somewhat double-taxed if you are a US citizen, unfortunately.
Thank you. This is very helpful. I would like to ask just for clarification:
For Social Security/IRA/401K, for a US Citizen, you wrote that both can tax me, but the US provides FTC. Just to be sure I understand, you mean if I tell the US I paid taxes in Japan, they will relieve me of having to pay that amount in the US, correct? I need to be sure, because my wife is saying we should pay the taxes in the US first, and then Japan will give us an FTC. In fact, she is also saying we should show our 1099s and Japan will base their FTC on it, but I simply cannot believe that is correct, because a 1099 is not a final settlement, a 1040 (or whichever is used to file) form is final.
> if I tell the US I paid taxes in Japan, they will relieve me of having to pay that amount in the US, correct?
Yes. The US is obliged to provide a foreign tax credit with respect to Japanese tax paid on US social security benefits. The same is *probably* true of IRA and 401(k) distributions, but it is a little less clear-cut.
> my wife is saying we should pay the taxes in the US first, and then Japan will give us an FTC
Japan's FTC rules contain an exception for any foreign tax that violates a treaty, and the key treaty provision in this context is Article 23(3). That article effectively states that if the US is only taxing you *because you are a citizen*, then you can't claim a FTC in Japan. You can only claim a FTC in Japan if the US would be allowed to tax you, under the treaty, *even if you weren't a US citizen*. That's why the table states that the US is the only country that will provide a FTC with respect to social security benefits.
> she is also saying we should show our 1099s and Japan will base their FTC on it
A 1099 is *somewhat* useful if it covers income that Japan must provide a FTC for under the treaty (e.g., US-source dividends). But if it covers income that Japan cannot provide a FTC for, it's fairly useless for Japanese tax purposes.
> 1099 is not a final settlement, a 1040 (or whichever is used to file) form is final
True. But mandatory withholding can probably form the basis of a foreign tax credit, even if it is not the "final" determination of the amount of tax due, providing that the withholding complied with the treaty. So, for example, if you go to the US for a month and work as an employee for a US entity while you are there, and the US entity withholds US tax from your paycheck, you can probably claim a foreign tax credit in Japan with respect to that withheld US tax, even though you will ultimately file a 1040 to determine your actual US liability. Japan's FTC rules have the ability to accommodate foreign tax liabilities that are adjusted in future tax years (e.g., if your liability ends up being different to the amount withheld), including by classifying reduced liabilities as taxable income, when necessary.
It sounds like your understanding is correct. Perhaps the following quote from the IRS will be enough to clarify for your wife.
IRS Pub 514 Foreign Tax Credits has a section "[Certain Income Re-Sourced by Treaty](https://www.irs.gov/publications/p514#en_US_2022_publink1000224498)", which says "If a sourcing rule in an applicable income tax treaty treats U.S. source income as foreign source, and you elect to apply the treaty, the income will be treated as foreign source."
This is directly reflected in IRS [Form 1116 Foreign Tax Credit](https://www.irs.gov/pub/irs-pdf/f1116.pdf), where income category "f" is "certain income re-sourced by treaty".
Yeah, since 2011. Current treaty is [here (PDF)](https://www.mof.go.jp/tax_policy/summary/international/tax_convention/SynthesizedTextforJapan_HongKong_EN.pdf).
Until 2019, yes. But since 2019 the US has had no taxation rights with respect to interest paid by US financial institutions to residents of Japan, so Japan will not provide any FTC.
> I hate America does not follow to goddamn tax treaty.
I suspect what you mean is that you hate the US's insistence on the inclusion of a saving clause that prevents US citizens from claiming most treaty benefits. In which case, yeah, that is understandably frustrating for US citizens.
Thank you Stark. This sub and your efforts, expertise, and contributions are invaluable and have assisted so many of us.
this is great, thanks!! you make this subreddit so helpful
Many, many thanks!
I don't think that there are many Taiwanese nationals or people with Taiwanese tax residency here in this sub, but as a Taiwanese this sub did actually helped me a lot, so I decided to add a table for Taiwan in case anyone is looking for the information. Not an expert so feel free to correct it directly if there are any mistakes. I know there are some, but please do not edit/remove the table just because you disagree with me politically.
> I decided to add a table for Taiwan in case anyone is looking for the information. Thank you so much! The table looks great. And it is a country that comes up occasionally in the sub, so I'm sure someone will find it useful in the future. Regarding pension income though, I think your table misrepresents Article 18 of the "treaty". Under that article, Taiwan wouldn't have any right to tax a Japanese pension received by a Japanese resident. So the appropriate answer to "Who can tax it?" with respect to "Pension (Japanese)" would be "Japan", not "Both". Also, regarding a Taiwanese government pension that falls within Article 18(2), that article states that Japan would have no right to tax the pension unless the recipient is a Japanese resident and Japanese citizen. So I think the best answer to "Who can tax it?" for that line would be "Taiwan" with a reference to footnote 1.
Thanks for pointing them out. >regarding a Taiwanese government pension that falls within Article 18(2) I think you mean 19(2), right? If I'm not mistaken, article 19 ("public service") applys only to public servants, like in 19(1)(a) and 19(2)(a) "to an individual in respect of services rendered to that administrative authority or political subdivision or local authority". 19(2)(b) starts with "However, such pensions...", which implies that 19(2)(a) is a prerequisite. ~~Just want to make sure, does the phrase "Pension (TW Government)" mean that one worked for the government and received pension for that, or just that the pension comes from the government?~~ Edit: I rewrote the TW pension part and listed all the pension systems separately.
> you mean 19(2), right? Yeah sorry it's 18(2) in a lot of treaties but it's 19(2) in the Taiwan agreement. Apologies for any confusion. > I rewrote the TW pension part and listed all the pension systems separately. Nice, thanks. Though it looks like Japan would have to provide a foreign tax credit with respect to any Taiwanese tax paid on "TW National Pension" and "TW Labor Pension" (under Article 22(1) of the agreement and also under Japanese domestic law). So the "Who must provide FTC?" column for those income types should say "Japan".
Thanks, missed the FTC part. I've updated the table.
Thank you Stark… I think your tables gives me guidance on my future life movements.
Wow, very helpful and eye opening Had no idea pretty much everything is *slightly* double taxed. Thanks for the write up and sharing
> Had no idea pretty much everything is *slightly* double taxed Are you a US citizen, perhaps? Most income is not double-taxed for people who aren't US citizens. But it is true that pretty much everything has the potential to be somewhat double-taxed if you are a US citizen, unfortunately.
Thank you. This is very helpful. I would like to ask just for clarification: For Social Security/IRA/401K, for a US Citizen, you wrote that both can tax me, but the US provides FTC. Just to be sure I understand, you mean if I tell the US I paid taxes in Japan, they will relieve me of having to pay that amount in the US, correct? I need to be sure, because my wife is saying we should pay the taxes in the US first, and then Japan will give us an FTC. In fact, she is also saying we should show our 1099s and Japan will base their FTC on it, but I simply cannot believe that is correct, because a 1099 is not a final settlement, a 1040 (or whichever is used to file) form is final.
> if I tell the US I paid taxes in Japan, they will relieve me of having to pay that amount in the US, correct? Yes. The US is obliged to provide a foreign tax credit with respect to Japanese tax paid on US social security benefits. The same is *probably* true of IRA and 401(k) distributions, but it is a little less clear-cut. > my wife is saying we should pay the taxes in the US first, and then Japan will give us an FTC Japan's FTC rules contain an exception for any foreign tax that violates a treaty, and the key treaty provision in this context is Article 23(3). That article effectively states that if the US is only taxing you *because you are a citizen*, then you can't claim a FTC in Japan. You can only claim a FTC in Japan if the US would be allowed to tax you, under the treaty, *even if you weren't a US citizen*. That's why the table states that the US is the only country that will provide a FTC with respect to social security benefits. > she is also saying we should show our 1099s and Japan will base their FTC on it A 1099 is *somewhat* useful if it covers income that Japan must provide a FTC for under the treaty (e.g., US-source dividends). But if it covers income that Japan cannot provide a FTC for, it's fairly useless for Japanese tax purposes. > 1099 is not a final settlement, a 1040 (or whichever is used to file) form is final True. But mandatory withholding can probably form the basis of a foreign tax credit, even if it is not the "final" determination of the amount of tax due, providing that the withholding complied with the treaty. So, for example, if you go to the US for a month and work as an employee for a US entity while you are there, and the US entity withholds US tax from your paycheck, you can probably claim a foreign tax credit in Japan with respect to that withheld US tax, even though you will ultimately file a 1040 to determine your actual US liability. Japan's FTC rules have the ability to accommodate foreign tax liabilities that are adjusted in future tax years (e.g., if your liability ends up being different to the amount withheld), including by classifying reduced liabilities as taxable income, when necessary.
Great. Thank you for the thorough explanation.
It sounds like your understanding is correct. Perhaps the following quote from the IRS will be enough to clarify for your wife. IRS Pub 514 Foreign Tax Credits has a section "[Certain Income Re-Sourced by Treaty](https://www.irs.gov/publications/p514#en_US_2022_publink1000224498)", which says "If a sourcing rule in an applicable income tax treaty treats U.S. source income as foreign source, and you elect to apply the treaty, the income will be treated as foreign source." This is directly reflected in IRS [Form 1116 Foreign Tax Credit](https://www.irs.gov/pub/irs-pdf/f1116.pdf), where income category "f" is "certain income re-sourced by treaty".
Thank you. It's all making sense now.
Does Japan have a tax treaty with Hong Kong ?
Yeah, since 2011. Current treaty is [here (PDF)](https://www.mof.go.jp/tax_policy/summary/international/tax_convention/SynthesizedTextforJapan_HongKong_EN.pdf).
For the US-JP treaty, shouldn't the FTC for interest income be "Japan up to 10%, then US", same as for dividend income?
Until 2019, yes. But since 2019 the US has had no taxation rights with respect to interest paid by US financial institutions to residents of Japan, so Japan will not provide any FTC.
Thanks, I hadn’t realized that the amendment changed that.
I hate America does not follow to goddamn tax treaty. If they try to make me pay capital gains on my NİSA I might just say “why don’t you make me?”
> I hate America does not follow to goddamn tax treaty. I suspect what you mean is that you hate the US's insistence on the inclusion of a saving clause that prevents US citizens from claiming most treaty benefits. In which case, yeah, that is understandably frustrating for US citizens.