European investor in Japan

[LukeTek]

Hello everyone,

I am an EU citizen (Italian), I’m 29, and I am about to move to Japan (as soon as the open the borders again, finger crossed...).
I am trying to figure out how to start investing there, but I am a bit confused about several points. As you can see from my following questions, I’m quite new to the investment world.

Here’s what I know for sure, but please correct me if I’m wrong:

• I should pay into my pension as much as possible
• I should open an iDeCo and a NISA account and max them out as much as possible
• I should have a safety account to be able to handle an emergency without ever touching any other investment account
• I should invest everything else in a standard taxable account

Supposing this high-level overview is correct, I have several questions about the last point:

1. If I invest in a US ETF, am I double-taxable? I know this is the case for US citizens, but I wonder if this applies to EU citizens as well. Actually, I am pretty sure I read somewhere that EU citizens are prohibited from investing in US assets but I see some brokers like IB let me do that...and I am saying I could invest in VOO (not only VUSD).
   I also found this beautiful explanation (https://www.bogleheads.org/wiki/Non-US_ ... x_traps#A4) that suggests I will be taxable if I’ll ever hold more than 60k USD in US-based ETFs. Is this the correct situation applicable to me? Then I guess that whenever possible I should invest in the Ireland based ETF equivalent, right?
   1. If I can invest in US ETFs without worrying about the double taxation (or Ireland equivalents), and considering how well the US market historically performed, what kind of portfolio would you suggest without being too US-centric but still pretty aggressive on US stocks?
2. Why should I choose to invest through a bank like Rakuten and not using a low-cost broker like IB (which allows me to have a JPY based account)? Afaik banks have quite higher expenses, right?
3. I read something about not being taxable for the first 5 years of staying in Japan for overseas revenues. If it’s true does that mean I could have investments in an oversea account, say an IB account (which is held outside Japan), for 5 years without paying any tax on it, on top of an already existing iDeCo/NISA?
4. Can you recommend me some good reference to remain updated on everything regarding taxes? Especially for EU citizens, because atm almost everything I could find seems to be applicable only to US or sometimes UK citizens...

[RetireJapan]

1. If I invest in a US ETF, am I double-taxable? I know this is the case for US citizens, but I wonder if this applies to EU citizens as well. Actually, I am pretty sure I read somewhere that EU citizens are prohibited from investing in US assets but I see some brokers like IB let me do that...and I am saying I could invest in VOO (not only VUSD).
   I also found this beautiful explanation (https://www.bogleheads.org/wiki/Non-US_ ... x_traps#A4) that suggests I will be taxable if I’ll ever hold more than 60k USD in US-based ETFs. Is this the correct situation applicable to me? Then I guess that whenever possible I should invest in the Ireland based ETF equivalent, right?
   1. If I can invest in US ETFs without worrying about the double taxation (or Ireland equivalents), and considering how well the US market historically performed, what kind of portfolio would you suggest without being too US-centric but still pretty aggressive on US stocks?
2. Why should I choose to invest through a bank like Rakuten and not using a low-cost broker like IB (which allows me to have a JPY based account)? Afaik banks have quite higher expenses, right?
3. I read something about not being taxable for the first 5 years of staying in Japan for overseas revenues. If it’s true does that mean I could have investments in an oversea account, say an IB account (which is held outside Japan), for 5 years without paying any tax on it, on top of an already existing iDeCo/NISA?
4. Can you recommend me some good reference to remain updated on everything regarding taxes? Especially for EU citizens, because atm almost everything I could find seems to be applicable only to US or sometimes UK citizens...

Hi LukeTek

Welcome to the forum! Your understanding is pretty much correct, and I'm jealous you are getting started so early

A few quick points as I should be working now:

The US has a withholding tax on dividends. For people in Japan this is 10%.
Your heirs may have to pay US inheritance taxes if you die (the 60,000 dollar thing) but I believe residents of Japan have a much higher limit
Rakuten Securities is an online broker, not a bank. It has low costs. The biggest advantage vs. IB is that a domestic broker will give you access to iDeCo and NISA, and also do your taxes for you. With IB, you have to do your own tax calculations.
The overseas tax exemption is for income, apparently, so not sure investments would count (2017 change).

Anyone else?

[LukeTek]

Interesting!
The withholding you are talking about is detracted directly from the broker, I suppose. If not I would not know hot to pay it. Also, if I keep auto-reinvesting my gains till day X, that means I will pay that 10% only on day X, right?
As far as you know, does Rakuten trade ETFs? It seems like it doesn't from a quick web search

[RetireJapan]

Interesting!
The withholding you are talking about is detracted directly from the broker, I suppose. If not I would not know hot to pay it. Also, if I keep auto-reinvesting my gains till day X, that means I will pay that 10% only on day X, right?
As far as you know, does Rakuten trade ETFs? It seems like it doesn't from a quick web search

No, you pay that tax every time a dividend is paid. If a company or fund does not pay a dividend, you wouldn't pay the tax. The withholding tax does not apply when you sell the shares or funds.

Rakuten has both Japanese and US ETFs (and possibly other markets like Singapore/Hong Kong, I've never really looked into that).

[LukeTek]

No, you pay that tax every time a dividend is paid. If a company or fund does not pay a dividend, you wouldn't pay the tax. The withholding tax does not apply when you sell the shares or funds.

Rakuten has both Japanese and US ETFs (and possibly other markets like Singapore/Hong Kong, I've never really looked into that).

So is the only point on reinvesting automatically to avoid having to manually do it? Is there no tax or other benefit?
Also, would the withholding tax for the US be taken directly by the broker?