# Retirement Pension Taxes: US & Japan



## Buzzcut

I've been trying to make sense of the US-Japan tax treaty provisions for both US Social Security and the Japanese two-tiered, Social Security-like pension plan called "nenkin," but I'm very confused. I could definitely use some help!

I'm a US citizen and a permanent resident in Japan, and after I retire I expect to stay in Japan. I'll receive bimonthly pension payments from the Japanese nenkin program starting at age 63, plus I'll also get a little monthly US Social Security after age 66 1/2, reduced because of the US Windfall Elimination Provision (WEP).

As for taxes, I'm wondering if I must report BOTH countries' amounts to BOTH countries' tax authorities? Or does the tax treaty have something to say about that?? I’ve tried reading the treaty online, but I can’t make sense of it. And I can’t find a clear explanation about the taxation of both US Social Security and Japanese nenkin on the IRS site or the Japanese Tax Agency site.

If someone knows about this, please share your thoughts. Thanks!


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## larabell

I'm expecting to be in the same position in a few years so I'm also interested in the answer. But at the moment all I can offer is a best-guess.

I would expect each country's payments to be considered ordinary income by the opposite country, and thus reportable on your return as "foreign-source" income. But, of course, the income is only taxable in one place due to the effect of tax credits (compliments of the tax treaty). You'll eventually pay tax on both and, even if you report both on the other return, unless you're making a killing, the overlapping tax should be eliminated by tax credits. At least that's the way it's supposed to work.

I would suggest asking a tax expert from each country whether, and to what degree, retirement payments from a foreign country are taxable. How much of each country's own retirement payments are taxable and under what conditions is something you can find out in the standard documentation. Armed with the four separate answers, you should be able to put together a single big picture. It might also make a difference where you pay the tax and where you apply for a credit.

The next time I have an occasion to talk to either of my tax preparers I will bring up the question and if I find out anything new I'll post a follow-up. Unfortunately, I doubt there are many (if any) forum members who are in the same situation and would have first-hand knowledge.


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## myrrh

Both of you probably know about these sites:

International Social Security Agreement?Japan Pension Service
Application Procedures for Japanese Pension Benefits?Japan Pension Service
https://www.ssa.gov/international/index.html

These are the three most accurate and helpful English-language sites that I have found. 

I am still a few years off myself. That said, several of my friends/former colleagues have successfully done this. What they report suggests Larabell's comments here are accurate:



> I would expect each country's payments to be considered ordinary income by the opposite country, and thus reportable on your return as "foreign-source" income. But, of course, the income is only taxable in one place due to the effect of tax credits (compliments of the tax treaty). You'll eventually pay tax on both and, even if you report both on the other return, unless you're making a killing, the overlapping tax should be eliminated by tax credits. At least that's the way it's supposed to work.


I.e., you have to report this as income in both countries, but are ultimately taxed by only one. Which country and at what rate is a little complicated--depends among other things on one's country (and state/prefecture) of residence. As the process itself is also confusing, I'd say the best bet would be to pay a Japanese accountant to confirm that everything with your Nenkin is good to go, then pay a US accountant familiar with these issues to do the same regarding Social Security. That's my plan, anyway.


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