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Re: US citizens and NISA
Posted: Wed Jan 20, 2021 12:49 am
by Kanto
hoshimo wrote: ↑Wed Jan 20, 2021 12:37 am
hello, just wondering if there has been any new news on this topic since the last post.
i'm a us citizen, currently using rakuten securities tsumitate nisa, 3万円/mo into eMIAXIS Slim 全世界株式（オール・カントリー）after looking at all the advice on the forum here. but just read a few posts on reddit with a few us citizens saying that they "can't do iDeCo nor NISA" which confused me a bit. am i good? or am i going to have to deal with a huge tax/irs mess? i tried looking through the forum, but couldn't seem to find a definitive "best practices for us citizens" anywhere. if there is a post like that, please let me know, thanks!
Not can`t, shouldn't.
The tax treatment of PFICs is extremely punitive compared to the tax treatment of similar investments that are incorporated in the U.S. For example, an American holder of a U.S. incorporated mutual fund invested in European stocks pays the low long-term capital gains rate of 0-20% if the fund is held for more than one year. The same American investor who buys a nearly identical fund listed in the UK or in Switzerland (or any place outside the U.S.) will find their investment subject to the PFIC taxation regime, which counts all income (including capital gains) as ordinary income and automatically taxes it at the top individual tax rate (37.0%). In some cases, the total tax on a PFIC investment may rise to well above 50% because of the complex rules regarding the timing of PFIC income recognition. Furthermore, capital losses on PFICs can only offset other investment gains in limited circumstances.
https://thunfinancial.com/home/american ... ual-fund/
The IRS takes no prisoners.
I suggest you exit this position and invest with an international broker like IBKR or a broker in America that will have you.
Re: US citizens and NISA
Posted: Wed Jan 20, 2021 1:34 am
by RetireJapan
hoshimo wrote: ↑Wed Jan 20, 2021 12:37 am
i'm a us citizen, currently using rakuten securities tsumitate nisa, 3万円/mo into eMIAXIS Slim 全世界株式（オール・カントリー）
EEEK.
Japan has no problem with you doing this. Unfortunately you have an obligation to submit tax forms to the IRS, and the IRS
really doesn't like foreign mutual funds (which is what eMaxis Slim funds are). This article provides an introduction to the subject:
https://www.investopedia.com/terms/p/pfic.asp
Best practice for US citizens seems to be to invest in the US using a US broker, which means you can't use Japanese tax-exempt accounts and your tax paperwork here is a bit more time-consuming. Or give up US citizenship.
Anyone else?
Re: US citizens and NISA
Posted: Wed Jan 20, 2021 1:47 am
by hoshimo
thanks for the quick responses. i'd rather not have to wrestle with the irs, so i guess i'll stop all of my NISA stuff. it's unfortunate. i thought i finally found something fairly simple that was better than letting my money sit in a bank. not sure if i want to give up my us citizenship just yet. since i started just this past december, and have a whopping 2000円 in rakuten securities now, what do i do from here?
Re: US citizens and NISA
Posted: Wed Jan 20, 2021 1:52 am
by Kanto
hoshimo wrote: ↑Wed Jan 20, 2021 1:47 am
thanks for the quick responses. i'd rather not have to wrestle with the irs, so i guess i'll stop all of my NISA stuff. it's unfortunate. i thought i finally found something fairly simple that was better than letting my money sit in a bank. not sure if i want to give up my us citizenship just yet. since i started just this past december, and have a whopping 2000円 in rakuten securities now, what do i do from here?
As an American, they may not allow you to buy US ETFs or single stocks. However, single Japanese stocks should be no problem.
Try to set-up a broker back home, or move to IBKR Interactive Brokers and start investing that way.
If you made no profit, you probably do not need to file for your NISA investment, however, I will not pretend to understand American tax rules.
Re: US citizens and NISA
Posted: Wed Jan 20, 2021 3:55 am
by hoshimo
on the 年別損益 tab, the 合計 is 0 for both 2020 and 2021, so i hope i'm good...? on the 投資信託 tab, it says my 評価損益 is +71円 though.
for my next step to clean this mess up, do i go to the 売却 tab, click 全部売却, and then 確認?
Re: US citizens and NISA
Posted: Thu Jan 21, 2021 2:46 am
by hoshimo
i think i found an answer to my own question about cancelling here:
https://kabukiso.com/rakuten/t-sell.html
it looks like my 2000 yen will turn into 2090 yen if i sell. will the irs come after me for 90 yen? should i wait for it to dip below 2000 yen and then sell?
Re: US citizens and NISA
Posted: Thu Jan 21, 2021 3:05 am
by Kanto
hoshimo wrote: ↑Thu Jan 21, 2021 2:46 am
i think i found an answer to my own question about cancelling here:
https://kabukiso.com/rakuten/t-sell.html
it looks like my 2000 yen will turn into 2090 yen if i sell. will the irs come after me for 90 yen? should i wait for it to dip below 2000 yen and then sell?
Hmmm I think you will probably be fine. However, you can just file this with your tax return to be safe.
Re: US citizens and NISA
Posted: Fri Jan 22, 2021 4:21 pm
by TokyoWart
hoshimo wrote: ↑Thu Jan 21, 2021 2:46 am
i think i found an answer to my own question about cancelling here:
https://kabukiso.com/rakuten/t-sell.html
it looks like my 2000 yen will turn into 2090 yen if i sell. will the irs come after me for 90 yen? should i wait for it to dip below 2000 yen and then sell?
I don't really understand the PFIC rule but I think at 2000 yen you are well below the de minimis threshold for completing form 8621:
"De minimis exceptions – The final regulations retain an exception to PFIC reporting if: (i) the shareholder has not made a QEF or mark-to-market election, (ii) is not treated as receiving an excess distribution or recognizing gain treated as such during the shareholder’s tax year, and (iii) either (A) the aggregate value of all PFIC stock owned at year-end does not exceed $25,000 ($50,000 for a joint return), or (B) the PFIC stock is owned through another PFIC, and the shareholder’s proportionate share of the upper-tier PFIC’s interest in the lower-tier PFIC does not exceed $5,000 in value."
https://expattaxprofessionals.com/blog/ ... -reporting
Re: US citizens and NISA
Posted: Sat Jan 23, 2021 10:05 am
by ctdummy9
Reading this thread, it seems that a US citizen can invest in a NISA, while holding only individual Japanese stocks to avoid the PFIC taxation issues. Surely, investing in individual Japanese stocks, it will be much harder to diversify, but given the tax advantage of the NISA, it might still be a worthwhile path to explore, am I missing something?
Re: US citizens and NISA
Posted: Wed Jan 27, 2021 1:00 am
by judomarshall
TokyoWart wrote: ↑Fri Jan 22, 2021 4:21 pm
I don't really understand the PFIC rule but I think at 2000 yen you are well below the de minimis threshold for completing form 8621:
"De minimis exceptions – The final regulations retain an exception to PFIC reporting if: (i) the shareholder has not made a QEF or mark-to-market election,
(ii) is not treated as receiving an excess distribution or recognizing gain treated as such during the shareholder’s tax year, and (iii) either (A) the aggregate value of all PFIC stock owned at year-end does not exceed $25,000 ($50,000 for a joint return), or (B) the PFIC stock is owned through another PFIC, and the shareholder’s proportionate share of the upper-tier PFIC’s interest in the lower-tier PFIC does not exceed $5,000 in value."
https://expattaxprofessionals.com/blog/ ... -reporting
(ii) is not treated as receiving an excess distribution or recognizing gain treated as such during the shareholder’s tax year
From what I can tell, this means I'm going to get hit very hard once I decide to start withdrawing money from that account since the excess distribution would almost certainly exceed the dividends and interest I am have been receiving over the past 3 years.