RetireJapan

RetireJapan wrote: ↑Thu Jan 25, 2024 7:15 am

Tkydon wrote: ↑Thu Jan 25, 2024 6:59 am

RetireJapan wrote: ↑Thu Jan 25, 2024 4:50 am Why would they be paying income tax on investments? Either capital gains tax or tax on dividends, neither of which count as income, no?
You can also opt out of the pension due to low income which many Japanese FIRE types seem to do.

Interest, Dividends, and Capital Gains all come under the general heading of Income, along with employment / salary income, real-estate rental income, and so on... 収入

Interesting. But not if they are in a tokutei kouza presumably (or NISA)?

When doing my tax return preparation the other day, I had to choose between general taxation or separate taxation, with respect to my tokutei koza (of which I currently have a non-withholding variety) income.

In my case, with salary income, the separate taxation option seems to make sense but if I had no other income then I would probably be selecting the general taxation… but I guess it depends on how much one earned in the tokutei koza, too.

sutebayashi wrote: ↑Thu Jan 25, 2024 8:35 am In my case, with salary income, the separate taxation option seems to make sense but if I had no other income then I would probably be selecting the general taxation… but I guess it depends on how much one earned in the tokutei koza, too.

If your dividend income comes from Japanese Companies' stocks, and your total taxable income is less than about Y6M (exact threshold will depend on you actual circumstances), then it makes sense to select the Aggregate Taxation Method as the total tax would be lower due to the Japanese Stock Dividend Allowance, which compensates for the rising marginal tax rate of the Aggregate Taxation Method.

If you have dividend income from non-Japanese stocks, and your total taxable income is less than about Y3M (exact threshold will depend on you actual circumstances), then it makes sense to select the Aggregate Taxation Method as the total tax would be lower than the Separate Taxation Method, as you cannot use the Japanese Stock Dividend Allowance.

If over these thresholds, then the Separate Taxation Method yields the lower tax bill at the flat tax rates - 20.315% (15% National, 0.315% Reconstruction, and 5% Residents' taxes).

RetireJapan wrote: ↑Thu Jan 25, 2024 7:15 am

Tkydon wrote: ↑Thu Jan 25, 2024 6:59 am

RetireJapan wrote: ↑Thu Jan 25, 2024 4:50 am Why would they be paying income tax on investments? Either capital gains tax or tax on dividends, neither of which count as income, no?
You can also opt out of the pension due to low income which many Japanese FIRE types seem to do.

Interest, Dividends, and Capital Gains all come under the general heading of Income, along with employment / salary income, real-estate rental income, and so on... 収入

Interesting. But not if they are in a tokutei kouza presumably (or NISA)?

Here's all the types of income that are subject to income tax:
https://www.nta.go.jp/english/taxes/ind ... 023/05.pdf

For dividends in a Tokutei Kouza, that's "separate taxation at source (源泉分離課税)" so doesn't need to be declared, but it's still taxable (as Tkydon said). NISA is a special exception. Some info here: https://retirewiki.jp/wiki/Income_Tax