Foreign Pensions In Japan
Receiving Foreign Pensions in Japan:
Except for US or Canada (See later), if the source country of the Pension has a Tax Treaty with Japan, then (according to the treaties that I have checked so far - usually Article 17) the pension income is only taxable in the country of residence; i.e. Japan, and not in the other country.
The pension is probably paid net, subject to Withholding in the other country. In order to have the pension paid gross without Withholding Tax being deducted, it is necessary to file a form in the remote country claiming the provision of the Treaty.
The Pension should then be paid gross in the other country, with no taxes withheld. The Pension will be then be taxable in Japan, but it would not be necessary to claim a Foreign Tax Credit.
You need to submit PAYG Withholding Variation Application (Online or Paper NAT 2036) to reduce the amount of pay as you go (PAYG) tax withheld from income paid to you in the application year, and the payer (Aus Broker) can't vary the withholding rate until they receive an official variation notice from the ATO. You can submit the application in April for the following Tax Year starting in July.
The wording of Article 20 of the Canada Japan Tax Treaty is internally self contradictory, and so it may not be possible to claim eligibility for reduction of Withholding Tax.
Whilst Article 20 Paragraph 1 says that any income not specifically detailed in previous articles would only be taxed in the country of residence, Paragraph 3 of the same article says that each country will maintain the right to tax that income originating in that country, which, according to Paragraph 1 is only taxable in the other country...
You might try:
CRA Form NR301 (PDF): Use this form to declare eligibility if you are a nonresident individual (or a non-individual like a trust or corporation) taxpayer residing in a country where Canada has a tax treaty. Send this form to receive the reduced rate of tax or exemption on all or certain income. Claim exemption from Withholding on Pension Income under Article 20 Paragraph 1 of the Canada Japan Tax Treaty.
The basic principle of the Japan-UK Double Taxation Convention is that primary taxation rights are assigned to the country of main residence, which in the case of Japan-resident individuals is likely to be Japan. Article 17 confirms that this applies to taxes on pensions and annuities. Thus, recipients of UK pensions resident in Japan are likely to only be subject to Japanese taxes on the pension benefits, with the exception of pensions from service to the UK government or local education authorities.
The DWP does not deduct tax under PAYE when making payments of the state pension. If HMRC believes that there is tax payable then they should issue you with a Self Assessment tax return or, for the 2016/17 tax year onwards, they should issue a Simple Assessment of your tax bill.
Form Japan 1 DT and 'Japan individual notes' should be used by Japan residents wishing to claim relief on UK income tax on income from UK pensions. Applicants may find it easier to get the Japanese National Tax Agency Office to issue a certificate of residency rather than sign and stamp Form Japan 1 DT.
- United Kingdom#Taxation of state pension benefits for Japan-resident individuals
- United Kingdom#Taxation of UK personal pensions for Japan-resident individuals
Non-US Citizen / non-Green Card Holder
You have to correctly submit a Form W8-BEN to claim the reduced rate under a tax treaty between the foreign person's country of residence and the United States.
US Citizen / Green Card Holder
Unfortunately the US retains the right to tax its Citizens / Green Card Holders, and anyone who gives up US Citizenship or Residence for tax purposes for up to 10 years after the fact, who should pay the Tax in the US. Declare the Pension Income Gross (before those US Taxes) in Japan, and then claim the Foreign Tax Credit for the amount of tax paid in the US.
Many thanks to the following RetireWiki.jp users for writing this article: