RetireJapan

Hi All,

With a bit of advice from a friend (you know who you are) because I did not know it was possible on a normal NISA, I finally got around to investing in the ever so popular eMAXIS Slim fund using the remaining 345 yen on my NISA allowance for this year.... I will put more into it next year.

But I noticed it has the option for dividend reinvestment and that go me wondering, how does that work for your NISA? and how are they applied?

- Are the reinvested dividends tax free because they are obtained from a fund in a NISA?
- Are they added to that NISA fund or do they start a new investment in a taxable 一般 fund?
- IF they are added to the NISA fund, are they deducted from your NISA Allowance once reinvested? And if so, what happens if you used all your allowance before the dividends get reinvested?

The emaxis slim funds track a total return index, which includes dividends. This means that dividends aren't paid out from the fund and can compound within your NISA. That's why it's always best to go for funds like emaxis slim that don't pay out a dividend.

If the fund does have distributions, you can reinvest the dividends so long as you don't go over your 1.2 million yen yearly limit. If that does happen, the dividend will still be tax free but you won't be able to reinvest it within the NISA. My guess is that it would be paid out as cash into your general account, but I haven't looked into it.

https://www.ht-tax.or.jp/topics/nisa-hikazeitoshiwaku/
https://www.matsui.co.jp/service/nisa/s ... /dividend/

fools_gold wrote: ↑Wed Dec 09, 2020 12:53 am The emaxis slim funds track a total return index, which includes dividends. This means that dividends aren't paid out from the fund and can compound within your NISA. That's why it's always best to go for funds like emaxis slim that don't pay out a dividend.

If the fund does have distributions, you can reinvest the dividends so long as you don't go over your 1.2 million yen yearly limit. If that does happen, the dividend will still be tax free but you won't be able to reinvest it within the NISA. My guess is that it would be paid out as cash into your general account, but I haven't looked into it.

https://www.ht-tax.or.jp/topics/nisa-hikazeitoshiwaku/
https://www.matsui.co.jp/service/nisa/s ... /dividend/

If you choose for the funds not to be reinvested, they will be paid out into your money market/brokerage account. They are also taxable income I believe.

For a normal stock when dividends are paid out, the market value decreases. If you reinvest those dividends, your shares increase to balance out this difference.

Kanto wrote: ↑Wed Dec 09, 2020 1:03 am If you choose for the funds not to be reinvested, they will be paid out into your money market/brokerage account. They are also taxable income I believe.

Distributions from funds or stocks held in a NISA are untaxed, apart from the 10% withholding tax on US stocks and ETFs.

fools_gold wrote: ↑Wed Dec 09, 2020 1:24 am

Kanto wrote: ↑Wed Dec 09, 2020 1:03 am If you choose for the funds not to be reinvested, they will be paid out into your money market/brokerage account. They are also taxable income I believe.

Distributions from funds or stocks held in a NISA are untaxed, apart from the 10% withholding tax on US stocks and ETFs.

Sorry, I was speaking about general funds.

You are correct about NISA.

Emaxis Slim funds purposefully state their main goal is to reinvest dividends. Is it even possible to request dividends be paid out?

Kanto wrote: ↑Wed Dec 09, 2020 6:32 am Emaxis Slim funds purposefully state their main goal is to reinvest dividends. Is it even possible to request dividends be paid out?

Don't think so. I mean you can choose whether to have dividends reinvested or not when you buy the fund, but it has no bearing on whether the fund actually pays one or not.

fools_gold wrote: ↑Wed Dec 09, 2020 7:34 am I mean you can choose whether to have dividends reinvested or not when you buy the fund, but it has no bearing on whether the fund actually pays one or not.

That one caught me out a couple of times! If a fund doesn't pay a dividend it doesn't matter which option you choose