RetireJapan

This might not be the right thread for this, and if the information has been shared elsewhere I am truly sorry for asking this again (and would be grateful for a link), but does anyone know how the 新NISA will treat dividends?

What I mean is if I buy an ETF through it, and that ETF pays me a dividend I want to automatically reinvest, can I do that without using any further NISA allocations? Also, do I have to pay taxes on this dividend, or is it tax-exempt since it’s gotten through the NISA scheme?

Thank you for your time.

Billy wrote: ↑Mon Nov 13, 2023 8:37 am This might not be the right thread for this, and if the information has been shared elsewhere I am truly sorry for asking this again (and would be does anyone know how the 新NISA will treat dividends?

What I mean is if I buy an ETF through it, and that ETF pays me a dividend I want to automatically reinvest, can I do that without using any further NISA allocations? Also, do I have to pay taxes on this dividend, or is it tax-exempt since it’s gotten through the NISA scheme?

There's no change to the existing treatment.

Dividends are paid out tax free.
If you want to re-invest them, you need to use new allowance.

This is why it's better to invest in mutual funds that reinvest the dividends internally.

Billy wrote: ↑Mon Nov 13, 2023 8:37 am This might not be the right thread for this, and if the information has been shared elsewhere I am truly sorry for asking this again (and would be grateful for a link), but does anyone know how the 新NISA will treat dividends?

What I mean is if I buy an ETF through it, and that ETF pays me a dividend I want to automatically reinvest, can I do that without using any further NISA allocations? Also, do I have to pay taxes on this dividend, or is it tax-exempt since it’s gotten through the NISA scheme?

Thank you for your time.

No, the dividend is tax-free but leaves the Nisa. That is why funds (i.e Emaxis slim) are so popular. The fund reinvests the dividend internally, does not pay it out, and there is no taxable event.

Monex, has a DRIP settings currently for US etfs. However, I am unsure how that would work in a NISA.

Basically for all basic indexes, use a Fund. If it a special ETF, you will just have to accept less tax-efficiency.

Billy wrote: ↑Mon Nov 13, 2023 8:37 am This might not be the right thread for this, and if the information has been shared elsewhere I am truly sorry for asking this again (and would be grateful for a link), but does anyone know how the 新NISA will treat dividends?

What I mean is if I buy an ETF through it, and that ETF pays me a dividend I want to automatically reinvest, can I do that without using any further NISA allocations? Also, do I have to pay taxes on this dividend, or is it tax-exempt since it’s gotten through the NISA scheme?

Thank you for your time.

I just saw your post from last November about how ETF dividend re-investing works in NISA. I too am kind of interested in this although I recognise also that buying mutual funds in NISA is much more tax efficient. This is what I found. On Monex, you can set up ETF dividend re-investing in the NISA growth account, but unless you have enough quota left in your NISA growth section, the re-investment will not happen, or in certain circumstances will happen but in the taxable part of your account.

Q. 配当金再投資サービスは、配当金を非課税で再投資できますか？
A. 回答
源泉徴収後の配当金金額で再投資いたします。
NISA口座で保有の銘柄は、現地課税後の金額で再投資いたします。

https://faq.monex.co.jp/faq/show/7687?b ... order=desc

Also in this connection, Monex says that their dividend re-investment function is not the same as a DRIP so it does incur the regular foreign ETF purchase fees. I guess though as long as you select from the small number of zero fee ETFs such as VT, VTI, AGG etc, the re-investment too should be free of charge, again with the proviso that you still have enough NISA quota left for the year.

https://info.monex.co.jp/us-stock/etf_usa_program.html

ChapInTokyo wrote: ↑Fri Apr 19, 2024 8:09 am
I just saw your post from last November about how ETF dividend re-investing works in NISA. I too am kind of interested in this although I recognise also that buying mutual funds in NISA is much more tax efficient.

Are you investing for the long-term?
If so, why would you volunteer to pay more tax than is necessary? That seems to be the choice you make by choosing ETFs over mutual funds. Unless of course there is some sexy ETF which is not available as a Japanese mutual fund.

beanhead wrote: ↑Fri Apr 19, 2024 11:34 am

ChapInTokyo wrote: ↑Fri Apr 19, 2024 8:09 am
I just saw your post from last November about how ETF dividend re-investing works in NISA. I too am kind of interested in this although I recognise also that buying mutual funds in NISA is much more tax efficient.

Are you investing for the long-term?
If so, why would you volunteer to pay more tax than is necessary? That seems to be the choice you make by choosing ETFs over mutual funds. Unless of course there is some sexy ETF which is not available as a Japanese mutual fund.

Bond ETFs have lower costs than Bond mutual funds is one reason. AGG has a 0.03% ER, BSV has a 0.05% ER, and BNDX has a 0.07% ER. These are very competitive imho. Also, with US based bond ETFs such as AGG or BSV I think that the IRS should refund most of the 10% US withholding tax in Feb/Mar of the following year since interest-based dividends paid to non-resident aliens are apparently not subject to US withholding tax (this is what happens to bond ETFs I hold in my Firstrade account anyway. So for me the tax hit in a NISA account is probably minimal.

That's not to say I won't buy mutual funds in my NISA account though. I am currently thinking along the lines of maxing out my NISA quotas with 1/3 to eMAXIS SLIM all country, 1/3 to eMAXIS JGBi fund, and 1/3 to a mix of BND or AGG and BNDX.

P.S. As it turns out, neither BND or AGG or BNDX or for that matter BWX are approved for a NISA growth account... one possibility is Vanguard Extended Duration Treasury ETF or EDV, with an ER of 0.06%, which is available...

ChapInTokyo wrote: ↑Fri Apr 19, 2024 12:23 pm

beanhead wrote: ↑Fri Apr 19, 2024 11:34 am

ChapInTokyo wrote: ↑Fri Apr 19, 2024 8:09 am
I just saw your post from last November about how ETF dividend re-investing works in NISA. I too am kind of interested in this although I recognise also that buying mutual funds in NISA is much more tax efficient.

Are you investing for the long-term?
If so, why would you volunteer to pay more tax than is necessary? That seems to be the choice you make by choosing ETFs over mutual funds. Unless of course there is some sexy ETF which is not available as a Japanese mutual fund.

Bond ETFs have lower costs than Bond mutual funds is one reason. AGG has a 0.03% ER, BSV has a 0.05% ER, and BNDX has a 0.07% ER. These are very competitive imho. Also, with US based bond ETFs such as AGG or BSV I think that the IRS should refund most of the 10% US withholding tax in Feb/Mar of the following year since interest-based dividends paid to non-resident aliens are apparently not subject to US withholding tax (this is what happens to bond ETFs I hold in my Firstrade account anyway. So for me the tax hit in a NISA account is probably minimal.

That's not to say I won't buy mutual funds in my NISA account though. I am currently thinking along the lines of maxing out my NISA quotas with 1/3 to eMAXIS SLIM all country, 1/3 to eMAXIS JGBi fund, and 1/3 to a mix of BND or AGG and BNDX.

P.S. As it turns out, neither BND or AGG or BNDX or for that matter BWX are approved for a NISA growth account... one possibility is Vanguard Extended Duration Treasury ETF or EDV, with an ER of 0.06%, which is available...

Remember you have to bear the cost of the currency transaction, along with the tax-inefficiency and pain of dealing with the coupon

There are options, example BNDW wrap @ 0.132%

楽天・全世界債券インデックス（為替ヘッジ）ファンド
https://www.rakuten-sec.co.jp/web/fund/ ... 90C000HBG4

Also, all the US bond ETFs on JPX. Have you looked those over?

https://www.jpx.co.jp/english/equities/ ... 01-09.html

adamu wrote: ↑Mon Nov 13, 2023 8:54 am
Dividends are paid out tax free.
If you want to re-invest them, you need to use new allowance.

This is why it's better to invest in mutual funds that reinvest the dividends internally.

Do the "SBI Japan High Dividend Stock Fund" or "UFJ-Nikkei Average High Dividend Fund" reinvest the dividends internally or will they use new NISA allowance?

SBI Dividend Fund> https://site0.sbisec.co.jp/marble/fund/ ... =28931123C
UFJ Dividend Fund> https://site0.sbisec.co.jp/marble/fund/ ... rch_result

Tsumitate Wrestler wrote: ↑Fri Apr 19, 2024 1:42 pm

ChapInTokyo wrote: ↑Fri Apr 19, 2024 12:23 pm

beanhead wrote: ↑Fri Apr 19, 2024 11:34 am

Are you investing for the long-term?
If so, why would you volunteer to pay more tax than is necessary? That seems to be the choice you make by choosing ETFs over mutual funds. Unless of course there is some sexy ETF which is not available as a Japanese mutual fund.

Bond ETFs have lower costs than Bond mutual funds is one reason. AGG has a 0.03% ER, BSV has a 0.05% ER, and BNDX has a 0.07% ER. These are very competitive imho. Also, with US based bond ETFs such as AGG or BSV I think that the IRS should refund most of the 10% US withholding tax in Feb/Mar of the following year since interest-based dividends paid to non-resident aliens are apparently not subject to US withholding tax (this is what happens to bond ETFs I hold in my Firstrade account anyway. So for me the tax hit in a NISA account is probably minimal.

That's not to say I won't buy mutual funds in my NISA account though. I am currently thinking along the lines of maxing out my NISA quotas with 1/3 to eMAXIS SLIM all country, 1/3 to eMAXIS JGBi fund, and 1/3 to a mix of BND or AGG and BNDX.

P.S. As it turns out, neither BND or AGG or BNDX or for that matter BWX are approved for a NISA growth account... one possibility is Vanguard Extended Duration Treasury ETF or EDV, with an ER of 0.06%, which is available...

Remember you have to bear the cost of the currency transaction, along with the tax-inefficiency and pain of dealing with the coupon

There are options, example BNDW wrap @ 0.132%

楽天・全世界債券インデックス（為替ヘッジ）ファンド
https://www.rakuten-sec.co.jp/web/fund/ ... 90C000HBG4

Also, all the US bond ETFs on JPX. Have you looked those over?

https://www.jpx.co.jp/english/equities/ ... 01-09.html

Good point. I hadn't given much thought to the currency transaction bit. In an ideal world, I'd prefer to do the transaction at somewhere like Sony Bank with their competitive rates, and then keep USD on account at whichever broker I open my NISA account at. I wonder whether that is possible somewhere?

As for the coupon, I couldn't find any bond ETFs in the NISA section apart from EDV and that is a STRIP so no coupon to worry about. I am thinking that for bond ETFs in NISA, I would forget about re-investing but get the money to pay out for pocket money in retirement. I mean, at 4% on a maxed out 120 man x 5 yrs = 600 man yen stash, that would pay out 2 man yen tax free per month unless yen strengthens a lot over the next ten, twenty years?

Thanks for suggesting Rakuten's BNDW wrap. Because it is currency hedged, it could be a nice choice if the USD starts getting weaker against the yen, but according to the 運用報告書 the expense ratio is actually 0.26% (0.16% for the fund, and 0.10% for the underlying ETF and the Rakuten mother fund), whereas Vanguard only charges 0.05% for BNDW, so Rakuten seems to be adding a lot of cost for for not doing much work. Well, par for the course where investment companies are concerned I suppose lol!

https://www.rakuten-sec.co.jp/web/fund/ ... 90C000HBG4

I'll look at the US bond ETFs on JPX. Perhaps some of them are available for NISA! Thanks again.