Capital gains tax when selling

[grisha]

Hi everyone,

I noticed that earlier this year I bought ｅＭＡＸＩＳ 先進国株式インデックス instead of ｅＭＡＸＩＳ slim 先進国株式インデックス.
I think that what I'm currently holding is basically the same as the slim version, but with higher fees (correct me if I'm wrong).
I'm holding this both in my NISA account and 特定口座, and would basically like to sell both and buy the slim version. I bought most of it around April so it went up quite a bit.

If I understand correctly, selling and immediately buying the slim version will require me to pay capital gains tax on the current sum. Actually, short-term capital gains tax which is even worse. So what is the best way to proceed in this case? Should I wait a year since the last time I purchased the mutual fund and then sell it off and buy the slim version? What should I do about the NISA account? Am I stuck with this for 3 years?

Will appreciate any advice!

[Kanto]

Hi everyone,

I noticed that earlier this year I bought ｅＭＡＸＩＳ 先進国株式インデックス instead of ｅＭＡＸＩＳ slim 先進国株式インデックス.
I think that what I'm currently holding is basically the same as the slim version, but with higher fees (correct me if I'm wrong).
I'm holding this both in my NISA account and 特定口座, and would basically like to sell both and buy the slim version. I bought most of it around April so it went up quite a bit.

If I understand correctly, selling and immediately buying the slim version will require me to pay capital gains tax on the current sum. Actually, short-term capital gains tax which is even worse. So what is the best way to proceed in this case? Should I wait a year since the last time I purchased the mutual fund and then sell it off and buy the slim version? What should I do about the NISA account? Am I stuck with this for 3 years?

Will appreciate any advice!

NISA

I would keep the fund in the NISA. Assuming it's Tsumitate, you do not want to lose 20 years of tax-free allotment. If it is Regular Nisa, just sell it in 5 years.

Taxable

Capital gains from sales of certain securities (including shares/equity interest in corporations, warrant bonds, etc.) are taxed separately from other sources of income at a flat rate of 20.315% (i.e. 15.315% national tax and 5% local inhabitant’s tax).

https://taxsummaries.pwc.com/japan/indi ... 2C%20etc.)

Do the math here. Is the difference in fees, worth the difference in tax?

I would probably keep both.

[grisha]

Looks like the capital gains tax for securities is a flat rate. From the link you provided:

Capital gains from sales of certain securities (including shares/equity interest in corporations, warrant bonds, etc.) are taxed separately from other sources of income at a flat rate of 20.315% (i.e. 15.315% national tax and 5% local inhabitant’s tax).

[Kanto]

Looks like the capital gains tax for securities is a flat rate. From the link you provided:

Capital gains from sales of certain securities (including shares/equity interest in corporations, warrant bonds, etc.) are taxed separately from other sources of income at a flat rate of 20.315% (i.e. 15.315% national tax and 5% local inhabitant’s tax).

Oops, I should have read more carefully. Good catch.

[fools_gold]

If your capital gains mean that your investment is worth significantly more than 1.2 million yen you'd probably want to roll it over into another NISA when your five years is up.

[OkiBum]

Why would you pay capital gains tax if it is in your NISA account? You can sell it and buy the slim fund without any taxes.

Of course, you would eat into your annual limit of 1.2 million if you have a regular NISA.

[grisha]

Why would you pay capital gains tax if it is in your NISA account? You can sell it and buy the slim fund without any taxes.

Of course, you would eat into your annual limit of 1.2 million if you have a regular NISA.

I already maxed out my contributions for the year...

If your capital gains mean that your investment is worth significantly more than 1.2 million yen you'd probably want to roll it over into another NISA when your five years is up.

Isn't 1.2 million the yearly limit for nisa contributions rather than the total amount?

[fools_gold]

Isn't 1.2 million the yearly limit for nisa contributions rather than the total amount?

Sorry for not being very clear. In 5 years time you will have the choice to roll over your 2020 NISA investments into a new allowance, even if they are worth more than 1.2 million yen. Let's say your 2020 NISA is worth 2 million yen at that point. You can roll the whole 2 million into a new tax-free allowance. However, if you sell the funds and start again from scratch you'd only be able to invest 1.2 million tax free for the year. Therefore it would be better to keep the emaxis fund despite the higher fees.

[sutebayashi]

I'd keep both too - actually I've got both myself because I started NISA when eMAXIS slim funds didn't exist.
(I even have some relatively expensive ETFs in my NISA account for that reason, but they are up 20-40% so I don't care about the slightly higher costs when I'll hopefully be selling them for gainful tax-free profits many years from now, or when NISA ends.)

Actually, short-term capital gains tax which is even worse.

I don't think Japan has different rates for short-term and long-term gains, or am I missing it?

[Kanto]

I'd keep both too - actually I've got both myself because I started NISA when eMAXIS slim funds didn't exist.
(I even have some relatively expensive ETFs in my NISA account for that reason, but they are up 20-40% so I don't care about the slightly higher costs when I'll hopefully be selling them for gainful tax-free profits many years from now, or when NISA ends.)

Actually, short-term capital gains tax which is even worse.

I don't think Japan has different rates for short-term and long-term gains, or am I missing it?

Not for stocks and bonds, but it has differing rates for capital gain from property sale.

5 Years or less 39.63%
5 Years or more 20.315%

That is where some of the confusion comes from