Filing for stocks and investment trusts: how to use specified accounts, the new NISA, and loss offsetting correctly
Once they start investing, many people are unsure whether "a tax return is required" or whether "NISA does not need to be filed." Whether filing is required changes depending on the type of account, and depending on your annual profit-and-loss situation there are cases where filing a tax return works out better for you.
Account types and how taxation works
Tax return in principle not required
The securities company automatically calculates and collects the tax. Tax rate 20.315%. If you want to offset gains and losses across multiple accounts or carry forward losses, a tax return is required.[National Tax Agency No.1476]
Tax return required
The securities company calculates the tax for you but does not collect it. You must file a tax return yourself using the annual transaction report.
Completely tax-free, no filing required
All investment gains and dividends are tax-free. However, even if you incur a loss, it cannot be offset against gains in other accounts.
The tax-free allowance of the new NISA (from 2024)
Cases where filing a tax return is more advantageous
Case 1: You want to offset gains and losses across multiple securities companies
If you have a ¥500,000 gain at Company A and a ¥300,000 loss at Company B, offsetting them by filing a tax return means you are taxed on only ¥200,000. If you do not file, the full ¥500,000 gain at Company A is taxed.
Case 2: You want to carry a loss forward for three years (loss carryforward)
Stock losses can be carried forward for up to three years by filing a tax return. You can deduct the loss from gains in the following years and reduce your tax. You must file even in the year the loss occurs (if you start filing only from the next year, the carryforward is not allowed).[National Tax Agency No.1465]
Case 3: People with low income whose actual tax rate is 5% or 10%
Withholding in a specified account is a flat 20.315%, but if your total income is low, your actual income tax rate may be 5% or 10%. For dividend income only, choosing aggregate taxation lets you apply your actual tax rate.
Case 4: You want to use the dividend credit
If you file a tax return on dividends from domestic stocks under aggregate taxation, you can apply the "dividend credit." For people with taxable income of ¥6,950,000 or less, the tax burden may be lighter than the 20.315% withholding.[National Tax Agency No.1250]
Cases that need caution when filing
If you file a tax return on stock gains in a specified account (with tax withholding), your total income may rise and cause the following effects.
・An increase in National Health Insurance premiums
・Becoming ineligible for the dependent deduction or spousal deduction
・An increase in children's nursery fees and high school tuition
Please decide by comparing the advantage of filing (the tax saved) against the disadvantages (such as higher premiums).
Up to the 2023 tax year (Reiwa 5), for dividends and capital gains there was a method of splitting them, such as aggregate taxation for income tax but no filing for residence tax, to hold down the effect on National Health Insurance premiums. However, from the 2024 tax year (Reiwa 6 taxation) onward, the taxation methods for income tax and residence tax were unified and can no longer be chosen separately. Note that dividends and capital gains included in your tax return are also reflected in the calculation of residence tax and National Health Insurance.
Summary
FAQ
With a specified account (with tax withholding), is no tax return required?
In principle it is not required. However, if you want to offset gains and losses across multiple accounts, carry a loss forward for three years, or use aggregate taxation on dividends (the dividend credit), you file a tax return. Filing is optional, but if you include it, it is also reflected in residence tax and National Health Insurance.
Can a NISA loss be offset against other gains?
No. Losses within a NISA account are not eligible for loss offsetting or loss carryforward. In exchange for gains being tax-free, losses are also treated as nonexistent for tax purposes.
When do I file for a loss carryforward?
You need to file a tax return in the year the loss occurs. After that, until you have used up the loss (or three years pass), you continue to file every year even if you have no transactions.
For dividends, which is better: aggregate taxation or separate self-assessment taxation?
For people with low taxable income, using aggregate taxation and the dividend credit can be advantageous in some cases. However, from the 2024 tax year residence tax uses the same taxation method and it affects National Health Insurance premiums and the like, so decide after a comprehensive estimate.
Reference links (sources)
This article is based on materials from the following public bodies (neutral, primary sources). Because the rules are subject to revision, please check the latest content before filing.
- National Tax Agency No.1463 Taxation when transferring stocks, etc. (separate self-assessment taxation) (in Japanese)
- National Tax Agency No.1465 Treatment of transfer losses (deficits) on stocks, etc. (in Japanese)
- National Tax Agency No.1476 The specified account system (in Japanese)
- National Tax Agency No.1250 When you have dividend income (the dividend credit) (in Japanese)
- Financial Services Agency — The new NISA (in Japanese)
* This article is general information, not tax advice. For the choice of account and decisions on filing, please confirm with your securities company, the tax office, or a tax accountant.