tax on US etf's/stocks gains

[shadows]

Hi folks, I was trying to follow retirewiki.jp, I’d like to confirm something that’s been gnawing at my brain with the triple taxation on overseas ETFs/stocks.

eg.
*not including currency conversion fees from Yen to USD.
* assuming US ETFs/stocks

Buy an overseas ETF or stock $1000
Sell at $2001.

$2001- $1000 = $1001 profit

So now 3 taxes:
$1001 - 10% US withholding tax = $900.90
$900.90 - 20.315% Japan tax = $717.88 (so far that’s 30% tax)
$717.88 - (is there another % withholding tax paid to the US, or is it 0% due to the fact that the US was the country of origin?

Therefore US ETFs and stocks are taxed 30.315% on capital gains.

* and then, if using Rakuten as a Broker another modest currency conversion fee back to Yen.
* and finally taking consideration of the actual currency rates at the time of purchase and sale.

Am I accurate on this example? Thanks in advance.

[adamu]

Buy an overseas ETF or stock $1000
Sell at $2001.

$2001- $1000 = $1001 profit

So now 3 taxes:
$1001 - 10% US withholding tax = $900.90
$900.90 - 20.315% Japan tax = $717.88 (so far that’s 30% tax)
$717.88 - (is there another % withholding tax paid to the US, or is it 0% due to the fact that the US was the country of origin?

No, US withholding tax only applies to dividends, not capital gains.

So it would just be 20.315% Japanese tax on the gain.

But if your $1001 was a dividend rather than capital gain, your calculations are right. If the dividend included payments from non-US assets (like VT does), they will also have had those countries' withholding taxes deducted before the US tax was deducted.

[shadows]

Thanks for the clearing that up with me.

So if topped up already with 2023 NISA and not using iDeDo, accepting the capital gains tax of 20.315% on US ETFs/stocks plus 10% dividends is one option to invest while waiting for 2024 NISA.

I’m already holding a bunch of emax slim all country in a taxable trust so is it a disadvantage to actively dive into US ETF’s/stocks until 2024 NISA or just load up on more taxable emax slim? I guess that’s the 64,000 dollar question.

Comparing these types of fund performances one would suggest active ETF’s as being preferred while waiting until 2024 NISA. That is unless there’s some other kind of fund opportunity i'm not noticing.

[adamu]

I’m already holding a bunch of emax slim all country in a taxable trust so is it a disadvantage to actively dive into US ETF’s/stocks until 2024 NISA or just load up on more taxable emax slim? I guess that’s the 64,000 dollar question.

Comparing these types of fund performances one would suggest active ETF’s as being preferred while waiting until 2024 NISA. That is unless there’s some other kind of fund opportunity i'm not noticing.

If you're comparing eMaxis Slim All Country to an equivalent US ETF following the same index, the Japanese fund always wins in terms of taxes because it only pays US taxes on the US portion of the dividend, whereas the US fund pays US taxes on the whole dividend.

active ETF’s

I'm not sure what you mean by active. If you mean actively managed, then that's a whole different question.

[Tkydon]

.

[captainspoke]

If you're US, there won't be that 10% withholding on dividends, you'll just pay the 20% on it here.

If you're not, and 10% is withheld, you can claim it as foreign tax paid on your return, reducing your tax bill here by that much.

If you're particularly worried about dividend taxation, buy something like BRK-B, which doesn't pay a dividend.

Or to reduce dividends, buy a growth fund, which may pay less in dividends (percentage-wise) than the S&P or a total market fund. Eg, SCHG has an expense ratio of .04% (quite good), and a div yield of .51% -- about a third of VOO or VT.

Most US citizens use the FEIE, which excludes all overseas income up to ~$110,000. With the personal deduction, and effectively zero income, you can then play with some gains and dividends before any taxes get assessed. And if you focus on qualified dividends (a US oddity), it's something over $40k in dividends before you owe any taxes.