RetireJapan

You do not pay tax on the initial investment on the gain, so if you bought shares for 100,000 yen and sold everything for 150,000 yen you would pay tax on 50,000 yen.

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: ↑Mon Jan 20, 2025 3:33 am I asked my accountant in Tokyo, definitively, what will incur Capital Gains tax on the sale of an entire investment. Here is what she wrote back with:

You do not pay tax on the initial investment on the gain, so if you bought shares for 100,000 yen and sold everything for 150,000 yen you would pay tax on 50,000 yen.

I understand what my incorrect thinking about this is (as @beanhead had pointed out):

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.

I am purely thinking in terms of Yen-value, rather than price-per-unit.

In the example in my previous post, I was merely considering the Yen-value of the investment. But the others in this thread are saying that, even if the "gains" portion of the investment is sold, the "initial investment Yen-value" still holds unit-shares of the investment; those unit-shares still retain their appreciated value since purchasing them, initially. Therefore, when selling those shares that make-up the initial Yen-value of the investment, they would also incur capital gains tax (based on their appreciated per-share value from initial purchase to moment of sale).

However, judging by what my accountant had said, would this be true? From what I gather in her response, only the growth portion of the investment would incur Cap Gains tax, and the initial investment (valued in Yen) would not?

Is there something else that I am missing?

Edit: I am in no way trying to pull a "gotcha" on anyone who have supplied their time to help me understand this. I was trying to do my own research before asking my accountant. If anyone is also a tax professional and has conflicting knowledge about this, I am still very open to listen!

YouMeWeThem wrote: ↑Mon Jan 20, 2025 4:39 am What she said is true but is simplified to the point of causing you confusion about how this works.

When you make an investment, you buy shares. When you cash out of your investment, you sell shares.

So in the simplest case let's say you've purchased one share for 100,000. Later the value of one share is 150,000. When you sell your one share, the capital gains are 50,000 (the difference between the value at time of sale vs time of purchase).

But in reality, you likely have (for example) 100 shares that you've purchased for 1,000 yen each meaning the portfolio value when you made the investment was 100,000. Later on the value of one share is now 1,500 so your portfolio is worth 150,000. If you sell all 100 of your shares then your capital gains are 50,000, same as your accountant says.

The thing that it seems you're confused about is the case where you only sell a portion of your shares. You can't remove 50,000 yen from your investment, all you can do is sell an amount of shares that add up to a value of roughly 50,000 yen. Importantly, every single one of your shares has increased in value, so no matter whether you sell 1 or 100, you will always pay capital gains tax proportional to the gains realized.

cocacola wrote: ↑Mon Jan 20, 2025 6:13 am
Remaining number of shares is 67
Each share is valued at 1,500 yen
I sell all 67 shares
67 x 1,500 = 100,500 yen
↑ Is Capital Gains tax also applied to the sale of these 67 shares?
I know that there is 500 yen more in this sale than the original purchase so, at the very least, Cap Gains tax will be applied to that 500 yen.
But is Cap Gains also applied to the total sale of 67 shares?

I'm sorry to have the users run in circles with me. I really just want to make sure I understand this.

As always, if I've made any mistakes, please correct me.

zeroshiki wrote: ↑Mon Jan 20, 2025 6:31 am It's now 67 shares for 100,500 which is different from 100 shares for 100k. The capital gains is much higher than 500.

Your share price increased. You cannot prepay the capital gain so you owe nothing in the future. The only way to do that is just sell everything now, pay all the capital gains on it, then rebuy at the new price to get the round 100k number you want. But you'd have to do it every time the price increases.

67 x 1,000 = 67,000 yen
67 x 1,500 = 100,500 yen

100,500 - 67,000 yen = 33,500 yen
33,500 x 0.20315 = 6,806 yen
100,500 - 6,806 = 93,694 yen in my pocket

cocacola wrote: ↑Mon Jan 20, 2025 6:13 am I sell the gains, which means I sell enough shares to cover the gains.

cocacola wrote: ↑Mon Jan 20, 2025 6:13 am Remaining number of shares is 67
Each share is valued at 1,500 yen
I sell all 67 shares
67 x 1,500 = 100,500 yen
↑ Is Capital Gains tax also applied to the sale of these 67 shares?