First, the conclusion
For US stock dividends, tax is first withheld in the US and then taxed in Japan. For taxable accounts, there is room to consider foreign tax deductions, but for NISA, it is necessary to understand the treatment of domestic tax exemption and foreign taxation separately.
| Check points | way of seeing |
|---|---|
| US withholding tax | Taxes deducted from dividends on the U.S. side. |
| Japanese taxation | Domestic taxes are also involved in taxable accounts. |
| foreign tax credit | A system that adjusts double taxation under certain conditions. |
| NISA | Even if the Japanese side is exempt from taxation, this does not necessarily mean that foreign taxes will be eliminated. |
The important thing when reading tax articles is not just memorizing the system name. It's about looking at your income, accounts, deductions, and reporting methods separately.
common misconceptions
- I think if you use NISA, your US tax will be zero.
- Don't look at the after-tax yield of high-dividend ETFs.
- Do not consider the burden of reporting for foreign tax credits.
This is an area where it is easy to get confused just by reading the search article. In particular, "sales" and "income," "income tax" and "resident tax," and "NISA" and "taxable account" need to be treated as different things.
Order of actual checking
If you are confused, it will be easier to organize if you check them in the following order.
- Is the dividend from US stocks or US ETFs?
- NISA or taxable account?
- Do you have enough money to use the foreign tax credit?
- Have you compared the time it takes to file a return and the expected refund?
If it is still difficult to make a decision after looking at the above, it is safer not to leave it to your own judgment. Please check through official channels such as consultation with the tax office, the National Tax Agency's tax return preparation corner, and consultation with a tax accountant.
Summary
It is safer to look at US stock dividends not only in terms of pre-tax yield. If you separate the treatment of foreign taxes, domestic taxes, and NISA, you will be able to see your true take-home pay.
While it's hard to get away with not knowing about taxes, there's no need to fear them too much if you sort them out early. When your income increases, when you start investing, or when you want to use deductions, it is most practical to prepare your records early rather than at the end of the year.