RetireJapan

NakaZatoHamlet wrote: ↑Fri Feb 11, 2022 11:58 am There is information spread here and there throughout the boards, but I'm having trouble getting it all clear in my head. Could someone point to the key pros and cons of using International Brokers versus a Japan-based firm (e.g. Nomura/Rakuten/SBI).

In my particular case – I’m a UK expat with PR, many years of Japanese pension contributions, and I'm presently setting up a NISA and IDECO. I’m not sure I will retire in Japan. I don't read Japanese well, but can get by. The above question is related to doing some additional entry-level investing beyond these vehicles.

Thanks

There are two flavours of Interactive Brokers

1. Interactive Brokers Korea (IBKR) - They operate exactly like a Japanese Broker, except that their Web Site interfaces are all in English. They offer all the same services as Japanese Brokers and withhold taxes the same as Japanese Brokers.

2. Interactive Brokers (IB) - If you have an IB account in another country, they will not withhold Japanese Taxes, but will withhold other countries' Withholding Taxes as necessary.

Other International Brokers - Depending on various factors, you may or may not be able to open a Brokerage in another country.
If you are a US Citizen, you may not be able to open a Japanese Brokerage Account, due to the tax implications for US Citizens. See other threads.

NakaZatoHamlet wrote: ↑Sat Feb 12, 2022 1:21 am Thanks,
I think from other posts that there is a danger of paying more tax than necessary if using IB. Perhaps there is double or unnecessary taxation on US or European investments; is that true? If so, is there an approach to mitigate against it?
(Planning to invest in a handful of EFTs/mutual funds)?

IBKR withholds US or other Foreign Withholding Taxes and Japanese Withholding Taxes, as do other Japanese Brokers.

IB withholds US or other Foreign Withholding Taxes but not Japanese Withholding Taxes.

Other Overseas Brokers will withhold US or other Foreign Withholding Taxes but not Japanese Withholding Taxes.


If you are a Permanent Resident of Japan for Tax Purposes, you are liable for Foreign Withholding Taxes on Dividend and Interest Income and Japanese Taxes.

If you are a US Citizen, you will not have US Taxes withheld, but will have other Foreign Taxes withheld, and will have to file US Taxes, though you may be exempt under the FEIE.

If you see Foreign Withholding Taxes and Japanese Withholding Taxes withheld, then you should file a Kakutei Shinkoku and claim the Foreign Tax Credit for the Foreign Taxes withheld. You will then receive credit for the foreign taxes paid under the X Country - Japan Taxation Treaty against Japanese Taxes due.

Tkydon - That's very useful info; thanks!

Hi All,
I think I got it straight. Can I confirm I understand?

> A Japanese broker is easiest from a tax point of view. Some have a points system to reward payments, which gives a little extra return. Transfer of funds into a Japanese Broker from a Japanese bank account is simple. However, If I leave Japan, I can no longer invest with that broker (please confirm).

> Interactive Brokers (IB). This means more legwork for taxes. Some people on this board have reported difficulties and extra costs transferring in funds from a Japanese bank. A primary advantage is this approach is internationally portable.

> Interactive Brokers Korea (IBKR). This is easier than IB from a tax point of view. It is internationally portable (please confirm).

From these above points it seems like IKBR is the best option for any non-Japanese investor who doesn’t know where they will end up in the future. What am I missing here—as looking across these boards it does not seem to be a popular option? Are payments from a Japanese bank account also difficult/costly into IKBR? Is it actually internationally portable?
(I am a UK citizen, not a US citizen)

NakaZatoHamlet wrote: ↑Sat Feb 19, 2022 6:26 am
From these above points it seems like IKBR is the best option for any non-Japanese investor who doesn’t know where they will end up in the future. What am I missing here—as looking across these boards it does not seem to be a popular option? Are payments from a Japanese bank account also difficult/costly into IKBR? Is it actually internationally portable?
(I am a UK citizen, not a US citizen)

You can't get access to the tax-advantaged accounts using IKBR. No iDeCo, no NISA.
That is why most of those posting here will be using Japanese brokers such as SBI, Monex or Rakuten.
As a group, there is probably a high percentage of lifers on here as well.

If you are considering going somewhere else in the next, say, 5 years, then yes your plan to use IKBR is a solid one.
If you use Monex and decide to leave Japan you would have to sell everything and then buy again later. IKBR will not require that.

NakaZatoHamlet wrote: ↑Sat Feb 19, 2022 6:26 am...
> Interactive Brokers Korea (IBKR). ...

Well if their timeframe is 5 years, investing into a normal NISA would be good. Then they liquidate when they're about to leave and just re-buy in America when they go back there. This gets them the tax free advantage and still keeps them invested in the market. (Putting aside the risk it all goes down in 5 years of course which is a big IF)

Yes, I will max out Nisa with a Japan broker (Nomura) first. BTW, I chose Nomura because they were good at walking me and my partner through the process, and they actually switched their website to English to help me register!
The IBKR is for anything leftover that I want to 'invest and forget' - I'm thinking perhaps Vanguard LifeStrategy 80% or 100%.