RetireJapan

Hello,

Just wondering how taxes work on dividends which are reinvested into a fund?

What part of the investment will be taxed? And how is that calculated?

Sorry for the simpleton question.

Thank-you!

In Japan mutual funds are allowed to reinvest dividends internally, without paying them out. They are not taxed.

RetireJapan wrote: ↑Sat Jul 29, 2023 7:58 am In Japan mutual funds are allowed to reinvest dividends internally, without paying them out. They are not taxed.

Ah, that's great!

So, I am assuming that, when parts of the fund are paid-out, that amount will be taxed, according to capital gains, and income tax?

cocacola wrote: ↑Sun Jul 30, 2023 12:30 am

RetireJapan wrote: ↑Sat Jul 29, 2023 7:58 am In Japan mutual funds are allowed to reinvest dividends internally, without paying them out. They are not taxed.

Ah, that's great!

So, I am assuming that, when parts of the fund are paid-out, that amount will be taxed, according to capital gains, and income tax?

If dividends are paid out they are subject to dividend tax, which is a flat 20.315% (the same as capital gains). There are different ways to declare it, so it is possible to treat dividends as income (so if your marginal income tax rate is less than 20% it may be better to use that method).

The tax office will usually walk you through both, or an accountant would be able to recommend the best way to do the tax return.

But for most people, reinvesting the dividends internally will give you the best long-term return.

I will talk with my accountant on how best to move forward, tax-wise.

Thank-you!

RetireJapan wrote: ↑Sat Jul 29, 2023 7:58 am In Japan mutual funds are allowed to reinvest dividends internally, without paying them out. They are not taxed.

That is news to me, which means I'll have to look into getting the auto-reinvest set up I guess.

I get statements from SBI that appear to show 20% of dividends being withdrawn. The amounts are small, so I really don't pay much attention to them, but I suppose I should figure it out.

RetireJapan wrote: ↑Sat Jul 29, 2023 7:58 am In Japan mutual funds are allowed to reinvest dividends internally, without paying them out. They are not taxed.

That is news to me, which means I'll have to look into getting the auto-reinvest set up I guess.

Is this for mutual funds and stocks, or just mutual funds?

I get statements (stocks I seem to recall) from SBI that appear to show 20% of dividends being withdrawn. The amounts are small, so I really don't pay much attention to them, but I suppose I should figure it out.

TJKansai wrote: ↑Sun Aug 06, 2023 3:53 am
Is this for mutual funds and stocks, or just mutual funds?

For mutual funds. He is talking about all of the popular ones (eMaxis Slim series, the Vanguard-wrapped ones at Rakuten and SBI, Tawara no-load etc.

This is one of the reasons why they are recommended, isn't it? Low costs and the compounding of the growth and dividends without paying any tax until you sell.