NISA

From RetireWiki.jp
Jump to navigation Jump to search

NISA - Nippon (Japan) Individual Savings Account - is a type of tax-advantaged investment account modelled on the British Wikipedia:Individual savings account.

There are three types of NISA:

For a broader introduction of the three NISA types, see Comparison of NISA accounts.

Benefit

Investments are free of Japanese dividend and capital gains tax for 5 years, including the purchase year.

It is possible to maintain a total of 5 years of tax-free allowance at once.

  • Investments made in 2021 are tax free until the end of 2025.
  • Investments made in 2022 are tax free until the end of 2026.
  • ...etc.

Summary

  • It is possible to invest up ¥1,200,000 yen per year in a NISA
  • Investments are tax-free for 5 years, including the purchase year.
  • Any dividends earned in a NISA are free of Japanese taxes.
  • Any assets sold from a NISA are free of Japanese capital gains tax.
  • Selling an asset in a NISA does not return the annual allowance.
    • Thus the allowance is an allowance on total purchases for a year.
    • Once a purchase has been made, that amount of the NISA allowance is irreversibly consumed.

Rollover and the end of the 5-year period

When the 5 years are up, there is a choice of:

  • Moving unsold assets into a taxable account (the default)
  • Rolling over the assets, consuming all or part of the following year's allowance.

Move to a taxable account

For assets that are moved to a taxable account, future capital gains are calculated from the price of the assets at the time the assets were removed from the NISA.

Rollover

Rolling over an asset consumes the following year's NISA allowance up to the amount rolled over.

If the amount rolled over is less than the following year's allowance, only the required amount of the allowance is consumed. If the amount rolled over exceeds the following year's allowance, it can still be rolled over, but the entire balance will be consumed, meaning it will not be possible to invest new money into a NISA in the following year.

Rolling over is an alternative to investing new money in a NISA the following year. Whether to roll over is a nuanced decision, but if you are happy with the investments and plan to hold them longer, there are three situations where rolling over is a sensible choice:

  1. The asset value has grown to more than the annual allowance. In this case the full value can be rolled over, allowing for the tax-protected gains to be protected for another year, potentially making more capital gains tax free gains.
  2. The asset is making a loss, and you anticipate it will regain its value. This allows you to prevent paying capital gains tax on the recovery.
  3. You don't plan to invest in the NISA the following year, so may as well prolong the tax-protection duration of your existing investments.

See Also