Tax Return - Rakuten Securities

[adamu]

This thread is interesting, thanks. I'm wondering if I (and many others) are paying too much (capital gains) tax due to the automatic collection in a tokutei account. Although, to be honest if it works out to a few thousand yen, going through the hassle of a residence tax return doesn't seem worth it. Probably is if the amount gets into five-figures though.

[RMA]

Based on this information, today I changed the settings of my tokutei account from withholding tax to not withholding tax. I don't mind filling the return if in the end the gains are above ¥200,000 in a year. But if they are below then no withholding tax or return for me. Hope I'm correct?

There would be no national tax return, but there would likely be a requirement to file a tax return to your city. Check the details with your city. For instance this is how to file in Yokohama.

The ¥200,000 miscellaneous income exemption is offered by the National Tax Agency for salaried workers with an end of year adjustment. Local municipalities and the prefectures have different rules for collecting the taxes they are due.

Thank you for replying.

I understood that if I have gains under my tokutei (not withholding tax) account for less than JPY 200,000 then there will be no withholding tax and I do not need to pay any income tax or file national tax return. However I will need to file resident tax return as I live in Yokohama.

年末調整をしていない給与の収入金額や給与所得以外の所得金額について、合計額が20万円を超える場合は所得税の確定申告を行う必要があります。確定申告書については、お住まいの区を管轄の税務署へお尋ねください。合計額が20万円以下の場合には、原則確定申告は不要ですが、住民税の申告は必要となります。

[TBS]

This thread is interesting, thanks. I'm wondering if I (and many others) are paying too much (capital gains) tax due to the automatic collection in a tokutei account. Although, to be honest if it works out to a few thousand yen, going through the hassle of a residence tax return doesn't seem worth it. Probably is if the amount gets into five-figures though.

Yes, it is potentially true for some people. The saving could be up to ~¥30,000 (200,000 x 15.315%). However it won't be a good option for everyone. As you say, filing a residents tax return looks to be a time sink, more so than filing a normal kakutei shinkoku as there are fewer resources available on it. Having the capital gains go on a residents tax return may also lower municipal childcare subsidies. This blogger advises tokutei with withholding (源泉徴収あり) for general people.

[adamu]

This blogger advises tokutei with withholding (源泉徴収あり) for general people.

Interesting.

I noticed it mentions there is a 10% deduction available on taxes on dividends, via 配当控除, but only if you submit a tax return.

The choices seem to be:
Use 源泉徴収なし and submit a residence tax return if you make a gain but less than 200k, national tax return for more than 200k.
Use 源泉徴収あり and take the tax hit, but no tax returns required.
Use 源泉徴収あり, pay the tax but also do a tax return to take advantage of 10% 配当控除. It's still tax, but it's less than before.

You also need to consider that submitting a tax return could increase your nominal income, which may affect the band you are in in various income-based schemes.

Here is the info on the dividend deduction:
https://www.nta.go.jp/taxes/shiraberu/taxanswer/shoto

I'm trying to work out if there's a good blanket guideline. I think I tend to agree that the conditions for getting 源泉徴収なし right are so narrow that it's probably not worth it. It's probably also not worth submitting a tax return just for the dividend deduction, although you could certainly do it. If you're submitting a tax return anyway, it's a no-brainer.

[adamu]

I started a quick wiki page about the various Securities account types
https://retirewiki.jp/wiki/Securities_Account_Types

I would have liked to include the information discussed here about the pros/cons of 特定口座 源泉徴収なし, but I don't feel confident that I understand it and the implications well enough yet.

[TBS]

@adamu: thanks for starting the wiki page on this!

The dividend deduction only applies when opting for aggregate taxation (総合課税) of dividends along with all other income. People who do not file tax returns have their dividends taxed via the separate taxation system (分離課税) at the flat rate of 20.315%. Opting for aggregate taxation (総合課税) does not necessarily guarantee lower tax. It depends on someone's total annual income (so their marginal tax rate), whether they pay kousei or kokumin nenkin, what other deductions and allowances they receive etc. There is no easy rule of thumb to know which way is best, it has to be worked out on a case by case basis. Although this page suggests broadly that anyone with a total income of less than 9 million yen may benefit by opting for aggregate taxation (総合課税) of dividends.

It is difficult to write down a comprehensive list of pros and cons of 源泉徴収あり vs 源泉徴収なし accounts because it is so circumstances specific. None of the articles I read in Japanese on this cover all of the subtleties. Given the dividend deduction is not available for foreign held investments, and that the most popular mutual funds on this forum do not pay out dividends, it is not worth getting too bogged into this. It is also off topic from sogun771 and RMA's original question, which was about saving on national capital gains tax by opting for a residents tax return. I don't think this scenario is possible for dividends, as 分離課税 dividend taxes are always withheld at source.

That said I will try and expand the wiki a little on the 源泉徴収あり vs 源泉徴収なし issue. I personally use 源泉徴収なし, as I pay kousei nenkin (so the kokumin nenkin issue is not an issue), and I file a kakutei shinkoku each year anyway so I'd rather pay any capital gains taxes later and benefit from investing the money in the meantime. People thinking about using 源泉徴収なし tokutei should really be well-versed on the tax system and understand the consequences for their circumstances. Or they should seek a professional's advice before jumping in! For everyone else, you cannot go much wrong with 源泉徴収あり tokutei - it keeps life simple