Current Situation
I currently have an accountant hired by my company prepare my U.S. and Japan taxes, but they do not prepare my spouse's Japan taxes (in the U.S. we are filing MFJ). My spouse is not working in Japan nor does she have any assets in Japan, so the only income we have to be concerned about is her assets located in the U.S. She has a SIMPLE IRA, Traditional IRA, bank interest, and a joint taxable account. Last year we decided to only count the bank interest and 50% of the joint taxable account dividends (did not have any realized capital gains last year) as taxable income in Japan. It ended up being that my spouse was under the filing threshold for national taxes, but did need to file for local taxes although still no taxes owed. Actually my spouse went to the NTA and local tax authority several times inquiring as to how she should file taxes and they were surprised she wanted to declare anything from her overseas accounts at all!
1. I've read many threads on here with conflicting information as to whether or not " private pensions" (as defined in the U.S.-Japan tax treaty and includes IRAs) are taxable in Japan prior to distribution. Last year I took the view that we would not treat her IRAs as taxable. Has anyone obtained a clear read on this from the NTA?
Article 17(1) in the U.S.-Japan Tax Treaty states that payments shall be taxable. I am taking the position that no payments are being made by the pension fund until a withdrawal or distribution occurs from the pension fund. The funds are not available for use until then. Dividends and capital gains which do not leave the pension fund and are therefore not available for use, are not taxable in Japan or the U.S.
Article 17(1) states "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."
Future Situation
I have put together a table to show how I think worldwide assets are taxed in Japan and the U.S. based on the U.S.-Japan tax treaty and anecdotes I've read here. This situation would be applicable if I became a permanent resident in Japan for tax purposes and am therefore subject to tax on my worldwide taxes. It is more targeted towards retirement age and any taxation prior to that would depend on the answer to #1 in my current situation.
Thoughts/corrections? Anyone have a good spreadsheet or link for parsing Article 23?
