Is it the funds or the cash that gets transferred to the taxable account??

[MyTime]

Hi all,

First time I have posted for ages, but I wonder if anyone can help me understand something about the handling of the old NISA that is confusing me slightly. Apologies if this is a dumb question.

My previous understanding was that the funds I had bought in my 2019 NISA would be transferred to my taxable account at the end of this year, when their five-year NISA period comes to an end.

However, I recently got an email from Rakuten that says:

非課税期間が終了した商品は、課税口座（特定・一般）に払い出しされます。

その場合の取得単価は、本年最終営業日の基準価額もしくは終値になります。

A rough translation:
Products whose tax-free period has ended will be paid out to your taxable account (specific/general).
The unit price will be the base price or closing price on the last business day of the year.

If my understanding of this Japanese is correct, it's not the actual funds that will be transferred to the taxable account--the funds will be sold and the money received will be transferred. Am I correct in that understanding?

It seems pretty straightforward, but as it different from what I had expected, I just wanted to check.

Anyone more enlightened than me know for sure?

[adamu]

It is the investment that's transferred as you originally understood. It's not sold.

For the price, it means the deemed purchase price for future tax calculations. This is set to the market value at the end of the last trading day of the year. Hopefully this is much higher than what you actually paid for the fund, so you get the (unrealised) capital gain until then tax free.

Nothing is sold, but it's treated as if you bought it on the day of the transfer for tax purposes going forwards.

[MyTime]

Got you. Thanks very much for the clarification.

In a way, I was hoping that it was actually the cash, as that would have made using it to repurchase funds in the new NISA a little simpler.

[Tkydon]

Got you. Thanks very much for the clarification.

In a way, I was hoping that it was actually the cash, as that would have made using it to repurchase funds in the new NISA a little simpler.

You can do that. Simply sell the units, either before or immediately after the end of the NISA term, and they will transfer the cash to your account tax free, and it will be available for reinvestment.

[MyTime]

You can do that. Simply sell the units, either before or immediately after the end of the NISA term, and they will transfer the cash to your account tax free, and it will be available for reinvestment.

Yes, that is what I’m planning to do.

I’m assuming, though, that I would have to sell them before the end of the NISA term to 100% ensure that there would be no taxable event.

Which leads me to a slightly embarrassing question:

I’ve never actually sold any funds before, and I was looking at my (Rakuten) account to see if I could sell the funds before the end of the year (i.e. before they become taxable).

I could find the section of the website that detailed the funds in question (非課税期間満了対象一覧), but I couldn’t figure out how to actually sell them—there was no obvious button or anything to do that.

If anyone can give me some advice on how to do this, it would be much appreciated!

[RetireJapan]

If anyone can give me some advice on how to do this, it would be much appreciated!

If you are on Rakuten, I made a video about that: https://youtu.be/MNBPzKWXYDM

[MyTime]

If you are on Rakuten, I made a video about that: https://youtu.be/MNBPzKWXYDM

That was very helpful--many thanks!

So, I had a look at the site and figured out how to sell the funds. The only problem now is that I can't see any way of specifying that it is the units in the soon-to-expire NISA wrapper that I want to sell.

Does anyone know:
If I enter the amount of units shown in the list of funds that are about to be moved to the regular account (課税払出対象一覧), then will it be those units that are sold?

[adamu]

https://www.retirejapan.com/forum/viewtopic.php?t=3251

[MyTime]

https://www.retirejapan.com/forum/viewtopic.php?t=3251

Thanks for that.

Well, that would seem to mean that it would be the longest-held units, i.e. the units that are about to be moved out of the NISA, that would be sold.

As an aside, would I be correct in assuming that most people who intend to reinvest their funds that are coming out of the old NISA into the new one are doing the same thing as I am: selling the old NISA funds within the year and then buying funds in the new NISA next year?

Seems like the best approach to me to ensure that there will be no taxable event.

Anyone have any thoughts on that?

[RetireJapan]

https://www.retirejapan.com/forum/viewtopic.php?t=3251

Thanks for that.

Well, that would seem to mean that it would be the longest-held units, i.e. the units that are about to be moved out of the NISA, that would be sold.

As an aside, would I be correct in assuming that most people who intend to reinvest their funds that are coming out of the old NISA into the new one are doing the same thing as I am: selling the old NISA funds within the year and then buying funds in the new NISA next year?

Seems like the best approach to me to ensure that there will be no taxable event.

Anyone have any thoughts on that?

Makes no difference. The 'taxable event' will be any gain you make between January 1st and the date you sell, so likely minimal. As long as the funds are in a tokutei account the broker takes care of it too.

I'm going to wait until the funds move into taxable to avoid issues with selling the wrong ones, etc.