Securities account types
When opening a brokerage account with a Japanese broker, there are three categories of account:
- Tax-free accounts: NISA, Tsumitate NISA and Junior NISA
- Tax-reporting accounts: tokutei kouza (特定口座), either with automatic withholding of capital gains taxes (源泉徴収あり) or without (源泉徴収なし)
- Regular account: ippan kouza (一般口座)
Additionally, there is the iDeCo pension system, which provides income tax relief, in addition to tax-free gains and dividends - but is subject to withdrawal restrictions.
Most people will want to take advantage of the iDeCo and NISA/Tsumitate NISA tax-free systems before investing in a taxable account. However, when applying for a NISA, brokers also require you to open a taxable account at the same time, so it's good to understand your options for a taxable account even if you don't plan on using it immediately.
Choosing a taxable account type
For most purposes, the tax-reporting (特定) account is more convenient than a regular (一般) account, because it handles the generation of documents needed for reporting taxes. Additionally, there are two kinds of tax-reporting account:
- Tax reporting account with tax collection (特定口座 源泉徴収あり)
- Tax reporting account without tax collection (特定口座 源泉徴収なし)
The type of account to choose depends on individual circumstances, but the safest choice for people who are unsure is the tax collecting account (特定口座 源泉徴収あり). This will ensure that required taxes are paid even for people who otherwise do not need to submit a tax return.