RetireJapan

I was wondering.
What is the current rate of tax on funds NOT in NISA or IDECO?
and If we can already fill the NISA allocation..... is it worth it?

Thank you.

20.315%
If you put the funds outside of iDECO or NISA in a TokuteiKouza Account, the bank or broker will do all the taxes for you, and withhold the taxes.
If you put them in a regular account, you will have to file the taxes yourself in a Kakutei Shinkoku.

Bubblegun wrote: ↑Fri Jun 09, 2023 9:23 am is it worth it?

I am happy to have the 80% odd of the profits when I realize those profits, so I say yes.

Would be nice if it were only 10% or 5% or 0%. (Why they didn’t just lower this tax rate instead of doing complicated NISA things is beyond my ability to understand.)

I think the answer is pretty simple. They wanted people to invest long term and not day-trade.

sutebayashi wrote: ↑Fri Jun 09, 2023 11:23 am

Bubblegun wrote: ↑Fri Jun 09, 2023 9:23 am is it worth it?

I am happy to have the 80% odd of the profits when I realize those profits, so I say yes.

Would be nice if it were only 10% or 5% or 0%. (Why they didn’t just lower this tax rate instead of doing complicated NISA things is beyond my ability to understand.)

Now that would be common sense, sir. Would require endless meetings. LOL In fact, I'd also ask why the companies running such plans didn't push for this, or maybe even inform us, if we transfer money from these accounts to our kid's NISA accounts. I wonder how many parents set these up, and just let it run. Anyway I suppose 80% is pretty good. I think we are just loss averse.

Tkydon wrote: ↑Fri Jun 09, 2023 10:24 am 20.315%
If you put the funds outside of iDECO or NISA in a TokuteiKouza Account, the bank or broker will do all the taxes for you, and withhold the taxes.
If you put them in a regular account, you will have to file the taxes yourself in a Kakutei Shinkoku.

Yes, they did all those tax bits for us, when we took money out for college.

Bubblegun wrote: ↑Fri Jun 09, 2023 2:04 pm

sutebayashi wrote: ↑Fri Jun 09, 2023 11:23 am

Bubblegun wrote: ↑Fri Jun 09, 2023 9:23 am is it worth it?

I am happy to have the 80% odd of the profits when I realize those profits, so I say yes.

Would be nice if it were only 10% or 5% or 0%. (Why they didn’t just lower this tax rate instead of doing complicated NISA things is beyond my ability to understand.)

Now that would be common sense, sir. Would require endless meetings. LOL In fact, I'd also ask why the companies running such plans didn't push for this, or maybe even inform us, if we transfer money from these accounts to our kid's NISA accounts. I wonder how many parents set these up, and just let it run. Anyway I suppose 80% is pretty good. I think we are just loss averse.

Tkydon wrote: ↑Fri Jun 09, 2023 10:24 am 20.315%
If you put the funds outside of iDECO or NISA in a TokuteiKouza Account, the bank or broker will do all the taxes for you, and withhold the taxes.
If you put them in a regular account, you will have to file the taxes yourself in a Kakutei Shinkoku.

Yes, they did all those tax bits for us, when we took money out for college.

Such a plan would be seen as too favourable to the rich.

Most Japanese people see filling the 18. Million New Nisa limit as a near insurmountable task.

The FSA for example pushed for a continuation of the junior Nisa but it was rejected by elected officials feared it would be viewed as a tool that only favors the rich.

TokyoBoglehead wrote: ↑Fri Jun 09, 2023 11:40 pm Such a plan would be seen as too favourable to the rich.

Most Japanese people see filling the 18. Million New Nisa limit as a near insurmountable task.

The FSA for example pushed for a continuation of the junior Nisa but it was rejected by elected officials feared it would be viewed as a tool that only favors the rich.

In most countries, there are limits on the amounts of money that can be invested in Tax Advantaged Instruments; either tax deductable (tax-free) on the way in, and taxable distributions (taxable) on the way out, or non-tax deductable (post-tax) on the way in, and tax free distributions (tax free) on the way out.
The limits are set quite high, so are effectively unrestricted for the majority of the population who would invest below the limits.
In Japan, these are Japan National Pension, Japan '401k' Defined Contribution Company Pension, Individual iDECO, and NISA programs.

Japanese tax deductable programs would benefit from the government effectively funding the contributions to the tune of the investor's Marginal Income Tax Rate during the accumulation stage, whilst being subject to the investor's Marginal Income Tax Rate in retirement.

Japanese non-deductable programs would benefit from Tax Free distribution later (in retirement).

Both are effectively a Tax Arbitrage Play, arbitraging the tax rate(s) during the accumulation phase against the distribution phase tax rate.
Which you choose would depend on your tax rate(s) during the accumulation phase.

Anyone who wants to invest exceeding the limits is welcome to do so, but not in a tax advantaged instrument, but through a regular trading account investing non-tax deductable (post-tax) funds on the way in, and paying tax on distributions (taxable) on the way out, thereby capping the tax benefit.
In Japan, this can either be in a Regular Account, and the investors have to file taxes themselves, or in a Tokutei Account, and the financial institution withholds taxes and files on the investor's behalf.

zeroshiki wrote: ↑Fri Jun 09, 2023 11:57 am I think the answer is pretty simple. They wanted people to invest long term and not day-trade.

Well at least in my case, the 20% tax rate never stopped me from getting into short term speculation back in the days when I had more free time in my evenings.

If that were a goal, I believe other countries have capital gains taxes for short term trading, and lower or even zero tax rates for longer term investments.

Tkydon wrote: ↑Sat Jun 10, 2023 6:09 am The limits are set quite high, so are effectively unrestricted for the majority of the population who would invest below the limits.

This is the thing that gets me. The new NISA is only going to be taken full advantage of by people who, at least in my judgement, are rich. (Some people define rich as “people with twice as much money as me”, but my threshold is lower.)
So we have these complicated systems that, if anything, through their complicated nature may act as a barrier to entry for some, whereas simply having lower rates could avoid the complications and associated costs.

I am eagerly awaiting to see what happens to capital gains tax revenues after the new NISA starts. With almost no one paying any tax thanks to new NISA, I am thinking these revenues must be set to plunge.

There are costs and benefits of each approach. The costs of just lowering the rate would seem to be, “the (really, really) rich” get a good deal too. I am skeptical that is going to justify the costs of the approach.

sutebayashi wrote: ↑Sat Jun 10, 2023 6:41 am This is the thing that gets me. The new NISA is only going to be taken full advantage of by people who, at least in my judgement, are rich. (Some people define rich as “people with twice as much money as me”, but my threshold is lower.)
So we have these complicated systems that, if anything, through their complicated nature may act as a barrier to entry for some, whereas simply having lower rates could avoid the complications and associated costs.

I am eagerly awaiting to see what happens to capital gains tax revenues after the new NISA starts. With almost no one paying any tax thanks to new NISA, I am thinking these revenues must be set to plunge.

There are costs and benefits of each approach. The costs of just lowering the rate would seem to be, “the (really, really) rich” get a good deal too. I am skeptical that is going to justify the costs of the approach.

One can invest as much as one likes into Tsumitate NISA, up to Y1.2M per year (up to Y100k per month), and it can grow Tax Free.
One can invest as much as one likes into Investment NISA, up to Y2.4M per year (equivalent of up to Y200k per month), and it can grow Tax Free.
One can invest as much as one likes within these limits, up to a maximum total lifetime limit of Y18M, and it can grow Tax Free.
If it takes 20 or 30 years to there, then so be it.

iDECO limits monthly contributions to between Y23,000 per month (Y276,000 per year) and Y68,000 per month (Y816,000 per year) over the working lifetime of the investor, depending on level of participation in the National Pension Programs; Basic, Kousei Nenkin and Kousei Nenkin Kikin, etc..

Neither is really a lot of money, and so favour the lower income investor who saves money and can take full advantage of the tax deductions of tax-advantaged savings, rather than the higher income investor who, whilst saving more in tax deductions, is actually paying far more in Marginal Rate Income Taxes.

Over the last 20-30 years Japanese participation in investing has been low by international comparison, so any incentive to bring people to the market is seen as a good thing, both for the individual and for the Japanese Capital Markets.
If Japanese invest in their own retirement, this will potentially alleviate future pressure on the National Pension System. This too is seen as a good thing.
If these Japanese previous left their money in the bank at 0% interest, they weren't paying income taxes of any kind anyway.
One only gains a benefit to the extent that one is actually willing to put off consumption, save, and invest.

The aim is to change the slope of the Income Tax line so that the lower income earners can gain a proportionately greater benefit from such changes. This is very complicated and very difficult to achieve. The opposite is very much easier to achieve.

Yes, but couldn’t things be done by just having a lower capital gains tax rate? That’s my key point.

If one were able to keep 90 yen of any 100 yen profit made, instead of just 80 yen, that would have incentivized people invest more too. The capital gain tax need not be effectively 0%.

As a result, I will personally pay much less capital gains tax. Personally that’s nice for me… but aren’t I supposed to pay my fair share? Wouldn’t that have been simpler and better for tax revenues? I don’t know why these tradeoffs were selected.