1) If I did my homework correctly, I'm considered a non-permanent resident of Japan.
Yes, I think that's right. Since you have lived in Japan for less than 60 months out of the past 120, and since you are not a citizen of Japan, you are considered a non-permanent resident taxpayer. That is, you're a tax resident, but you're allowed some temporary benefits on foreign (non-Japanese) source income, with certain conditions. Once you hit the 5 year mark those temporary benefits end.
Several of the major accounting firms publish useful tax summaries. PwC's is located
here (click on the topics under "Individual"). You've probably already done that, or something like it, but for future reference for others it's useful.
You have a big tax-related decision to make if/as you approach the 5 year mark. Reading through the rules, Japan has a lower tax rate on capital gains for assets that are held at least 5 years. What might be possible before you hit the 5 year mark is to liquidate appreciated foreign assets to reset the cost basis, reinvest them (subject to any "wash sale" restrictions if Japan has them), and then avoid any short-term capital gains (selling assets held for less than 5 years). What I'm thinking here, specifically, is that you could start with the popular Irish domiciled/London listed funds (e.g. IWDA, EIMI, VWRD) but then, if you end up approaching the 5 year mark (and strictly before crossing it, whatever the tax year definition is), sell those assets and recycle them into the lower cost U.S. domiciled/listed equivalents or near equivalents. Japan has a reasonably favorable tax treaty with the U.S., as I recall....
....Yes, it does, so if you're able now or later to claim Japanese tax treaty benefits with the U.S., you'll really like investing in U.S. listed securities. In particular, the dividend tax rate is 10%, which is even better than the Irish treaty rate of 15%. Are you allowed to claim the Japanese tax treaty benefit without paying income tax during this first 5 year period? Interesting question! It's worth checking. Wouldn't that be something?
Therefore non-japan source of income are non-taxable.
Well, sometimes. From 2017, Japan started taxing the non-permanent resident taxpayers' income from the sale of personal property, such as houses and collectibles, even if not remitted to Japan. Foreign-listed securities are still non-taxable, at least if the proceeds (dividends, interest, capital gains) are not remitted into Japan. And before hitting the 5 year mark.
But I'm confused when I start diving into the details what is considered taxable. As IWDA reinvests dividends, are these dividends considered non-japan source of income if I buy IWDA them through IB using Jap local bank account? Meaning to say the Japanese government will know when I transfer Yen to USD through Japan local bank account, thus I believe the bank will report to the Jap Gov due to tax compliance. Or am I overthinking and over complicating all of it or maybe I'm just confused on the terms used for understanding tax?
First of all, IWDA reinvests dividends. There is never any distributed dividend, so there's nothing to remit even if you wanted to, except if you sell shares of IWDA. Second, it's perfectly OK to send money out of Japan to go buy something elsewhere in the world, such as foreign-listed securities. That's not a taxable event, not by itself.
If/when you hit the 5 year mark, you'll be subject to Japan's financial reporting requirement, to report your overseas assets.
2) If the answer to the previous question is yes and I will be taxed (20.315%) on dividends.
No, there are no distributed dividends with IWDA. They're internal to the fund. There are no dividends to remit. Only share sale proceeds, which include internally accrued dividends.
3) Even if I don't plan to retire in Singapore, would it still be wise to invest in ETFs in Singapore, maybe 10-20% of my portfolio as a backup plan? As it's still the only country where I can fall back upon.
You could, and you could use Interactive Brokers to do it (buy ES3) since you're a resident of Japan.
4) I'll like to understand more about the state nearing (7 years?) to retirement, since stocks are not currency, does it make sense to still think about returning back to SG to enjoy retirement as personal investments are non-taxable? Or am I overthinking about ramifications which are 20+ years later down the road?
The latter, I'd say. Singapore could quite easily change its tax treatment of passive income. I certainly wouldn't rule it out.
However, you probably should investigate what the Japanese tax advantaged savings vehicles are to see if those have merit. You could end up staying in Japan for a long time, or even forever, and I don't see any harm in taking advantage of those vehicles if they otherwise make sense.
5) I'm on the fence on this on self-contribution to CPF (naturally my Jap company doesn't contribute to CPF), I'll like to hear your take on this. Reading through many of BBCW replies, where if you have no idea where you'll retire, it kinda make sense to take on globalised investments such as IWDA 80% and CORP 20% of my portfolio?
I think the logic is similar to your approach to #3. You only currently have one country where you have an unambiguous right of abode, so to some extent you ought to respect that. Plus CPF really is a rather good deal. I think I'd do "a little." You'll probably need to add a little to your MediSave Account anyway in order to pay your MediShield Life premiums, at least. (MSL premiums cannot be skipped until you hit the 5 year mark overseas, and then you still might not.)
Always double or triple check tax advice, especially. I have some familiarity and experience with Japan's tax rules, but I'm not a true expert.
You didn't mention Japanese gift and inheritance taxes, but those are rather "interesting" from the 5 year mark onward. Just be aware of those if you decide to cross that threshold.