RetireJapan

When we're talking about the "average share cost" we're talking about the average price you've paid per share over the course of all your investments in that fund. So if you've made multiple investments the running tally would look something like this, but the only important number at the time of sale is the latest value in the Avg Share Cost column here.

(Sorry for three replies in a row)

And if you want the info straight from the horse's mouth then here's the NTA page on this calculation (though it's in Japanese).

https://www.nta.go.jp/taxes/shiraberu/t ... u/1466.htm

RetireJapan wrote: ↑Tue Nov 05, 2024 7:41 am

cocacola wrote: ↑Tue Nov 05, 2024 7:29 am But, if I initially purchased at 500 for the initial investment, sell all of the gains at 750 (leaving me with exactly the same amount as the initial investment), if I then sell the initial investment at 750, would that also be applicable to cap gains tax?

I think I'm confusing myself.

There is no 'original investment'. Japan does not allow you to segment your investments up like that.

There is only your total investment, and the average purchase price.

So, if I am understanding you correctly:

Initial investment: 100,000 yen
Investment valuation after 3-months: 105,000 yen

If I sell the entire investment (105,000 yen), it will all incur capital gains tax?

Cap gains tax = 20.315%

105,000 x 0.20315 = 21,331 yen (rounded-up)

I would have to pay 21,331 yen in cap gains tax?
Cap gains would not only be applied to the gains portion (5,000 yen)? It would be applied to the entire investment?

Thank-you for the info and any corrections.

cocacola wrote: ↑Sat Jan 18, 2025 8:49 am

RetireJapan wrote: ↑Tue Nov 05, 2024 7:41 am

cocacola wrote: ↑Tue Nov 05, 2024 7:29 am But, if I initially purchased at 500 for the initial investment, sell all of the gains at 750 (leaving me with exactly the same amount as the initial investment), if I then sell the initial investment at 750, would that also be applicable to cap gains tax?

I think I'm confusing myself.

There is no 'original investment'. Japan does not allow you to segment your investments up like that.

There is only your total investment, and the average purchase price.

So, if I am understanding you correctly:

Initial investment: 100,000 yen
Investment valuation after 3-months: 105,000 yen

If I sell the entire investment (105,000 yen), it will all incur capital gains tax?

Cap gains tax = 20.315%

105,000 x 0.20315 = 21,331 yen (rounded-up)

I would have to pay 21,331 yen in cap gains tax?
Cap gains would not only be applied to the gains portion (5,000 yen)? It would be applied to the entire investment?

Thank-you for the info and any corrections.

Yes, you will incur capital gains tax on the entire capital gain (the sale price - the purchase price).

cocacola wrote: ↑Tue Nov 05, 2024 5:35 am

Code: Select all

(price at time of sale - the average purchase price) x number of shares = capital gains

↑ is this correct to deduce how capital gains is being calculated?

If that is the case, then the principal amount will be used to calculate the capital gains, yes?

And, if the capital gains are positive, the 20.315% cap gains tax will be applied only to that capital gains value, not the entirety of the value of the sale?

Yes, correct.

Say you purchase 200 units at 500 each = 100,000
Each unit goes up to 505
Now 200 Units x 505 = 101,000

If you sell some units

Capital Gain Per Unit = Sale Price of 505 - Purchase Price of 500 = 5

Total Capital Gain = Number of Units Sold x (Sale Price of 505 - Purchase Price of 500)

So if you sell all 200 units the Taxable Capital Gain is the 1,000
If you only sold 100 units, the Taxable Capital Gain is the 500

the Capital Gain is assessed per Unit Sold.

You only pay Capital Gains Tax on the Gain. Not on the amount you originally invested.

Tkydon wrote: ↑Sat Jan 18, 2025 3:34 pm Say you purchase 200 units at 500 each = 100,000
Each unit goes up to 505
Now 200 Units x 505 = 101,000

If you sell some units

Capital Gain Per Unit = Sale Price of 505 - Purchase Price of 500 = 5

Total Capital Gain = Number of Units Sold x (Sale Price of 505 - Purchase Price of 500)

So if you sell all 200 units the Taxable Capital Gain is the 1,000
If you only sold 100 units, the Taxable Capital Gain is the 500

the Capital Gain is assessed per Unit Sold.

You only pay Capital Gains Tax on the Gain. Not on the amount you originally invested.

"You only pay Capital Gains Tax on the Gain. Not on the amount you originally invested."

Thank-you very much for making this clear. I was getting confused with some of the wording earlier, even though "capital gains tax" contains the words "capital gains".

I now fully understand that capital gains tax will only be applied to the gains, and not the principal investment.

cocacola wrote: ↑Sun Jan 19, 2025 1:00 am

Tkydon wrote: ↑Sat Jan 18, 2025 3:34 pm Say you purchase 200 units at 500 each = 100,000
Each unit goes up to 505
Now 200 Units x 505 = 101,000

If you sell some units

Capital Gain Per Unit = Sale Price of 505 - Purchase Price of 500 = 5

Total Capital Gain = Number of Units Sold x (Sale Price of 505 - Purchase Price of 500)

So if you sell all 200 units the Taxable Capital Gain is the 1,000
If you only sold 100 units, the Taxable Capital Gain is the 500

the Capital Gain is assessed per Unit Sold.

You only pay Capital Gains Tax on the Gain. Not on the amount you originally invested.

"You only pay Capital Gains Tax on the Gain. Not on the amount you originally invested."

Thank-you very much for making this clear. I was getting confused with some of the wording earlier, even though "capital gains tax" contains the words "capital gains".

I now fully understand that capital gains tax will only be applied to the gains, and not the principal investment.

And only on the Capital Gain on the Units you sell when you sell them.

The remaining units you keep also retain their unrealised Capital gain that will only be realised and subject to Capital Gains Tax when those units are sold...

Tkydon wrote: ↑Sun Jan 19, 2025 2:36 am And only on the Capital Gain on the Units you sell when you sell them.

The remaining units you keep also retain their unrealised Capital gain that will only be realised and subject to Capital Gains Tax when those units are sold...

So, to re-use the example you gave above:

Say you purchase 200 units at 500 each = 100,000
Each unit goes up to 505
Now 200 Units x 505 = 101,000

If I sell 1,000 yen (or dollars), that would be the gain, and I would have to pay cap gains tax on that.

After I sell the 1,000 yen gain, I would have 100,000 yen left, but the valuation of those unit-shares has gone up. Since I didn't sell those units yet, there are "unrealised capital gains" on those units, on that amount of yen.

If I sell any of that 100,000 yen worth of shares, those would be realised capital gains, so I would have to pay cap gains tax on that sale.

So, if I sell the entire "leftover" 100,000 yen, that would still incur capital gains tax. ← is this correct? Or, have I confused myself (yet) again?

cocacola wrote: ↑Sun Jan 19, 2025 2:52 am
If I sell 1,000 yen (or dollars), that would be the gain, and I would have to pay cap gains tax on that.

That's not the right way to think about it. As Don explained, each unit has a small gain.
So you would sell a certain number of units, including their gain. Around 2 units in your example of just selling 1,000yen.

cocacola wrote: ↑Sun Jan 19, 2025 2:52 am
If I sell any of that 100,000 yen worth of shares, those would be realised capital gains, so I would have to pay cap gains tax on that sale.

So, if I sell the entire "leftover" 100,000 yen, that would still incur capital gains tax. ← is this correct? Or, have I confused myself (yet) again?

Yes, this is correct.