"Article 11 of the United States- Japan Income Tax Treaty allows the source state to impose a withholding tax of 10 percent if paid to a resident of the other Contracting State that beneficially owns the interest. However, Article 11(3) of the treaty eliminates source-state withholding tax on broad categories of interest. The most significant of these is the elimination of source-state withholding tax for interest earned by financial institutions. This provision in the treaty is due to the highly-leveraged nature of financial institutions, imposition of a withholding tax on interest received by such enterprises could result in taxation that actually exceeds the net income from the transaction. Article 11(3)(c) provides that interest falling within this exemption includes interest beneficially owned by a resident bank, an insurance company, a registered securities dealer, or a qualified deposit-taking entity. In addition, Article 11(3)(d) exempt interest earned by pension funds from source-state withholding tax."
https://sftaxcounsel.com/income-tax-tre ... 20interest.
If I have understood the above correctly, based on Article 11(3) of the tax treaty between US and Japan, mortgage interest paid by a US resident to a Japanese bank is not subject to tax withholding. Is my understanding correct?
And in case I am correct and no withholding is required, is the US taxpayer still required to file Form 1042 or Form 1042-S because of the interest paid to his Japanese lender bank?