NISA explanation for this Dummy

[ChrisFukuoka]

I have to preface this with an apology if the questions are a little stupid but I am trying to wrap my head around the NISA investments.

So I opened a NISA account with Fidelity in January 2014 when they were first released. I invested the 1mil yen into it over the first year, and withdrew the cash April 2015. Since then I haven't touched my Fidelity account.

Where am I at for opening another NISA with, say for example, Rakuten? Is that possible? I am sure I have read somewhere I am only allowed one NISA account.

I am not really sure I understand the restrictions on NISA. Maybe a lot has changed since I took mine out. Back then there was a 5 year investment window with each year having 5 years of tax free growth (I think). Given I only invested for one year, what happens to the four years I didn't invest. Or am I just completely misunderstanding the whole concept?

I am confusing myself I am not even sure what questions I need to ask

[RetireJapan]

Hi Chris

Don't worry, there are no stupid questions here

Start here then come back with questions: https://www.retirejapan.com/nisa/

[ChrisFukuoka]

Ok, I have given that a good read.

I have a question about this section:

"The NISA system started in 2014. At present it is fairly limited, but there is a good chance it will be improved in the future. The government has made a slight improvement by allowing you to open a new account every year instead of every four years as originally planned. They are also considering extending the duration."

I can open a new NISA account every year. So this means if I open a new account every year over 5 years I can simultaneously hold 5 separate NISA accounts? And each NISA account can have 1.2m per year invested into the account with 5 years of tax relief on the investment? So in the 5th year I could potentially invest 6m yen?

[RetireJapan]

Yes, this is the most confusing part of NISA. I have no idea why they designed this program that is meant to encourage people to invest and then made it so convoluted that most people can't understand it

You are right. You can open a new account every year, the annual limit is 1.2m, and each 'year' is tax free for five years. Each year is treated separately, so you can open a new account at a different institution each year. By your fifth year you would indeed have (1.2x5=) 6m yen of total contributions.

After five years, you have three options:
1. sell the investments (capital gains will be tax free)
2. move the investments into a taxable account (the 'purchase' price will be the price at the time the tax exemption ended)
3. move the investments into a new NISA year (we are not sure how this will work with the 'new' NISA that seems to be in the wings)

Hope that helps!

[ChrisFukuoka]

I see.

So you can't actually invest more than 1.2m in any one account. You basically have to open a new account each year to continue investing. One account isn't good for five years of investing.

Under my assumption you would have been able to invest like this:

Year 1: Account 1 - 1.2m
Year 2: Account 1 - +1.2m (total 2.4m) / Account 2 - 1.2m
Year 3: Account 1 - +1.2m (total 3.6m) / Account 2 - +1.2m (total 2.4m) / Account 3 - 1.2m
etc...

But is seems each account is capped at 1.2m and you need a new account to continue investing each year? Is that correct?

[RetireJapan]

Yeah, that would be... much more generous. Each 'year' is a calendar year and the max contribution is 1.2 million yen. You must finish buying your investments by the beginning of December or so to make it by the deadline.

You can look at some of the progress reports on the site to see what that looks like in real time: https://www.retirejapan.com/?s=progress

[Bushiman]

It seems each account is capped at 1.2m and you need a new account to continue investing each year? Is that correct?

Hey, Chris.

It gets confusing with NISA account and NISA years...

Yes, each account is capped at 1.2m a year, for 5 years. Then, the investments you made within each individual NISA year are tax-free for 5yrs.
You could open another NISA account with a different securities company the following year, if for example, you didn't like the range of products offered from the company you chose in the previous year. This new NISA account will let you invest 1.2m that year. You can't still add money into your first NISA account though -that is locked for the 5 years (unless of course you wanted to sell)...

If you've done your research before opening a NISA, the likelihood of wanting to switch providers is minimal... So there's no need to open a new NISA account each year, you'll just automatically start using another of your 5 NISA years of tax-free investing... (See links below for a visual of this)
I think most of us here on RetireJapan have used either Rakuten or SBI due to the low fees and range of products you can invest in.

If you didn't max out the full 1.2m for a particular year, once that year finishes its 5 years of tax free growth/loss you can roll it over and then add to it, topping it up to 1.2m if you choose...

If you have Google Chrome and you use translate, I found these pages useful to visualise how NISA works...
https://www.fsa.go.jp/policy/nisa2/abou ... index.html

And this one gives a good example of how the 'rollover' works...
https://www.fsa.go.jp/policy/nisa2/case ... index.html

[eagleyes]

It is getting confusing but my understanding is that you can only open a single NISA account per person.
It can be Normal NISA (5 years investment with a max investment of 1.2myen every year) or TSUMITATE NISA (20 years investment with a max investment of 0.4myen). You cannot hold both at the same time. You can change from NISA to TSUMITATE and vice versa but the already invested money will follow the rules of the NISA type there were invested in.
You can change financial institution holding your NISA once per year if you have not started to invest in that year. Otherwise switching will occur the year after.

One account per person but your wife can open one as well and your children can have a Junior NISA maximizing the use of the system.

That is my understanding. Anything wrong?

[goodandbadjapan]

I'm just in my 3rd year of NISA so haven't needed o do any rollovers yet, but when the first year gets to five, am I right in thinking I can roll that over as is into the next year (so a sixth year, which is really just leaving the first year to grow, so to speak). Then the next year, could do that for the Year two NISA etc. I know I couldn't add to those accounts if they were maxed out in the year they were opened. but theoretically under current rules does that mean we can hold the NISA holdings as long as we want if we just keep rolling over?

[RetireJapan]

I'm just in my 3rd year of NISA so haven't needed o do any rollovers yet, but when the first year gets to five, am I right in thinking I can roll that over as is into the next year (so a sixth year, which is really just leaving the first year to grow, so to speak). Then the next year, could do that for the Year two NISA etc. I know I couldn't add to those accounts if they were maxed out in the year they were opened. but theoretically under current rules does that mean we can hold the NISA holdings as long as we want if we just keep rolling over?

For rolling over, the amount you originally invested is irrelevant: the key number is the value when the five year period ends. NISA account rules were changed a couple of years ago to allow you to roll over the entire balance of past NISA years, even if it is larger than the current limit.

Unfortunately we don't know what is going to happen when the current NISA system ends and the (proposed) new NISA starts. Will they let us roll over? Not sure.