RetireJapan

zeroshiki wrote: ↑Wed Dec 14, 2022 12:42 am It's not just one aspect, it's the whole thing. If I'm reading this right, in 2020, Japan's tax revenue from capital gains on stock sales and dividends was 5.3 trillion yen. Cutting capital gains by half would put the country in a hole by 2.7 trillion.

These NISA changes will do just such a thing, I expect.

Conversely, if they were to only lower the tax rate, but not to zero, the incentives to invest will increase, and tax revenues won’t be completely forgone as with the NISA loophole. Indeed if an investing boom of sorts occurs, then that would have a positive effect on tax revenues. And less unfair to the poor who cannot afford to invest and benefit from the tax break.

The NISA changes will lose capital gains revenues for certain, but might lead to knock on effects that boost other revenues though, perhaps…

How do you propose the government is able to sell this tax break primarily for the rich to its citizens?

These NISA changes will primarily benefit the rich, by my definition of rich, at least.

"Oh its now more simple"

Yes! Either way the rich will benefit most, but a simpler system would be better for the economy as a whole; instead of people advising other people how to navigate the tax system to their best advantage, people would focus instead on other aims, and produce more valuable stuff instead.

They didn't do an analysis because there's no way 2.7 trillion can be made up.

Well halving or quartering the rate was my personal idea, but yes one does wonder how the NISA tax breaks they have decided on “will be paid for”.

Some more folks were talking on TV more about it this morning - a key thing they were saying is the tax incentive is there, but how can the money be channeled more to Japan’s economy, rather than overseas investments?
They were also talking about this 3000 million yen income person taxation thing. Not such a big deal now, but the commentators skeptically wondered whether it’s not just a first step, with the threshold be gradually lowered over time. Again here, I don’t know if any benefits from that would outweigh the negatives.

While I agree NISA/iDeCo/Pension needs to be made more simple, taking a flamethrower to specifically just the capital gains tax is not the answer. Also, I don't think "NISA is for the rich anyway so let's benefit the rich even more" is a sound argument.
I'm not in favor of the growth allotment either so in my ideal world, only seniors would be cashing out and not the day traders. Day traders shouldn't be aided by the government in any way shape or form.

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As for the TV commentator concers about the "supporting the economy" bit, I have read articles about index funds being sold in T-NISA basically being foreign stocks (S&P500 or All-Country). It would really suck if they had some kind of domestic fund restriction but I'm not even sure how that would work. Would buying stock in a domestically domiciled trading company that's only purpose is to buy US ETFs be covered in such a scenario?

zeroshiki wrote: ↑Wed Dec 14, 2022 2:51 am While I agree NISA/iDeCo/Pension needs to be made more simple, taking a flamethrower to specifically just the capital gains tax is not the answer. Also, I don't think "NISA is for the rich anyway so let's benefit the rich even more" is a sound argument.
I'm not in favor of the growth allotment either so in my ideal world, only seniors would be cashing out and not the day traders. Day traders shouldn't be aided by the government in any way shape or form.

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As for the TV commentator concers about the "supporting the economy" bit, I have read articles about index funds being sold in T-NISA basically being foreign stocks (S&P500 or All-Country). It would really suck if they had some kind of domestic fund restriction but I'm not even sure how that would work. Would buying stock in a domestically domiciled trading company that's only purpose is to buy US ETFs be covered in such a scenario?

If it comes to that, probably, along with World-ex Japan funds in you taxable, ideco to balance out the tilt.

zeroshiki wrote: ↑Wed Dec 14, 2022 2:51 am I don't think "NISA is for the rich anyway so let's benefit the rich even more" is a sound argument.

I agree, but I was not giving my evaluation of these changes on the basis from the perspective of what it means for the rich, but for the overall economy.

As for what they could do to benefit the local economy, I was wondering whether they might eliminate capital gains taxes on domestic investments, but I suppose that trade agreements might not allow for that.

But there are various types of non-NISA policy that could be changed to make Japan a more attractive place for investment. There are things they could do to make it worse, also.

Would be nice if they could come up with changes that would make foreign investors and Japanese investors alike think “let’s invest more across the board in Japan”.

It find it ironic that Kishida is talking about hiking corporate tax rates in Japan, while giving investors the NISA tax break. At the margin it makes investing in Japanese assets look less attractive. He is getting a backlash for that idea anyway, whereas the NISA changes seem to be welcomed so far. I guess there are few people to complain about tax rate cuts versus tax rate hikes!

Was there more info on those changes?
I rolled over my allowance for 2023 so technically I have nothing to invest in NISA next year.
I’m hesitating to keep the money or invest in a tokutei account next year.
If I want to maximize gains in 2024, the best would be to not rollover and put the money in a tokutei account right? (Or sell)
I would lose the tax free thing on dividends but I can maximise the new nisa yearly amount and not be impacted by the lifetime limit I guess?
Or will this rollover thing won’t be allowed anymore and the money in old NISA will just be stuck in new NISA?

That would be quite sad for me, as in 5 years my portfolio already grew by 3M, with my 1st year and 5th year actually being quite bad

New NISA proposal formally announced today. https://news.yahoo.co.jp/articles/95007 ... 6e76d7901f. Tax sheltered total limit upped to 1800man. Seems like the yearly contribution limit will be upped to 360man with 120man being in tsumitate type investments (mutual funds I presume) and 240man in growth investments (ETFs and stocks). What is unclear is how existing NISA accounts will be treated - hopefully they will be grandfathered at the original contribution level (6 million for regular NISA). Also, more exciting is that if you sell you can re-use the allowance so, if I understand correctly, it will allow rebalancing within NISA which will be nice.

eyeswideshut wrote: ↑Fri Dec 16, 2022 1:01 pm New NISA proposal formally announced today.

Still not on the FSA page on Friday night.
Those that can, do.
Those that can't, work for the Japanese government?

Here is a link to the proposal as found on the LDP's home page. There is no indication that minors will be able to open NISA accounts after 2023 [edit: no explicit rejection, though, either]. Keep an eye on this page for the cabinet-approved version, which should be out before long. Changes from now on are likely to be minimal, but they are possible.

One important aspect of the tax reform that people may be overlooking in their focus on NISA is what's going to happen to inheritance tax. Currently, any gifts to statutory heirs (or to others specified in wills, or -- I believe -- to beneficiaries of life-insurance policies) are included in the value of the deceased's estate for a period of three years BEFORE the time of death. So if you've been giving 1.1 million yen each year to your spouse and two children, when you die, 9.9 million yen gets added to your estate for inheritance-tax purposes. (The actual amount is irrelevant -- applicable gifts of any size get added to the estate.)

This three-year look-back is going to be extended in stages to seven years beginning in 2027, with the full seven-year look-back coming into effect in 2031. If you anticipate leaving an estate larger in size than the standard deduction, this change is something you'll want to keep in mind (i.e., the earlier you give, the less your inheritance tax will be). The ostensible reason for the change is to encourage the early transfer of assets to the next generation, thereby invigorating the economy, but the practical effect is of a tax increase, and senior citizens will likely feel more concerned about their own financial security if they feel compelled to give away their assets without knowing how long they might have to rely on those assets themselves. There will be a 1-million-yen tax deduction available for the amounts gifted during the extended period (a total deduction, not 1 million yen per year), but the effect of that deduction is not likely to be very large.

Also, the early-inheritance system is going to be reformed in a way that should make it a more attractive option than it is now. Currently, once the election is made, all further gifts of any size to the same recipient must be reported on a gift-tax return. The reform institutes a 1.1-million-yen annual exemption to that requirement, meaning that tax-free gifting beyond the early-inheritance amount will become possible, and one site speculates that under the wording of the current proposal, this tax-exempt amount could even be excluded from the seven-year look-back regime described above. Although only speculation at this point (the site notes the puzzling lack of consistency with the regular gift tax), such a consideration -- if confirmed -- would make early inheritance a very appealing option indeed.

This is a rather quickly prepared post, so don't be too surprised if some details are off.

Allowing the 18M lifetime limit to be freed up is a game-changer. While I chafe at the day traders getting excited for this, the limit is still 2.4M a year so it's not that big of a gift to them. For us who did some questionable fund purchases or had some bad luck with fund liquidations, this at least means we can recover some of that 18M limit and not have to carry it for the rest of our lives.

I'd have to run some numbers but at first glance, the revolving limit does seem to advantage the people who started regular NISA within 5 years of 2024 (so no rollovers yet). The people who did regular NISA rollovers kind of get the shaft (but not by much) and the people who chose T-NISA because of its longer timeframe (and not because it was all they could afford) get shafted more. I use shafted in a not so serious sense though because everyone benefits from this NISA improvement. Its way more generous than I imagine most of us could have hoped for.

Blog post about the new system: https://www.retirejapan.com/the-new-eternal-nisa/

Comments/corrections welcome!