New Tsumitate NISA

[ToushiTime]

EDIT: Apologies, I posted a link here, but the information was out of date. Please scroll down to Adamu's post below.

[sutebayashi]

I assume they will be shifted to a taxable account, with a starting valuation as of that date.
Any gains from now until then are tax free, that is the whole point.

[RetireJapan]

Now, instead of ending in 2037, tsumitate NISA will end in 2042, with that final year being tax free until 2061.

The New NISA replaces tsumitate NISA, so the system will end at the end of this year. The 2023 tsumitate NISA will be tax-free until the end of 2042.

[adamu]

Hi,
I read this about changes to tsumitate NISA here: https://www.retirejapan.com/nisa-changes/
"There is just one change to tsumitate NISA, and that is that the duration has been extended by five years. Now, instead of ending in 2037, tsumitate NISA will end in 2042, with that final year being tax free until 2061."

That is out of date information from 2021. The whole system is being replaced with a single NISA from next year, see https://retirewiki.jp/wiki/NISA#New_NISA_from_2024 and:

The tax reform outline (税制改正大綱) adopted by the ruling parties on December 16 received cabinet approval on December 23. See this MOF page for updated links to the general description and the complete proposal. Links to these documents will also be found on other government sites. The MOF provides a "lite" version of the key points in English in this two-slide PDF document..

As mentioned by fiyamaguchi, no provision exists for under-18s to open NISA accounts or add to current Junior NISA accounts after 2023: the basic expectation is that upon expiration, legacy Junior NISA accounts will be cashed out or transferred to another account (what kind of account isn't exactly clear, but the Financial Services page cited above by fiyamaguchi says that the nontaxable status of assets will be able to be maintained until the account holder turns 18, so it appears that some sort of procedure will eventually be set up even if new investments won't be allowed).

The total investment limit can be partially replenished by selling assets, but the annual limits cannot be reclaimed in this way, so an investor will have to wait until the following year to make use of the extra investment pool.

Between now and January or February is when the proposals will change in status from the outline (大綱) to proper Diet bills (法案); the Ministry of Finance is responsible for the language of the bill for national taxes, while the Ministry of Internal Affairs and Communications takes responsibility for local taxes. The wording may incorporate adjustments to facilitate implementation and iron out wrinkles. Once submitted, bills normally don’t get changed much, but formal committee approval precedes final submission, and opposition parties can certainly make their opinions known in the open-session Q&As that take place.

The Deloitte summary of the reform, in English, can be downloaded here.

[ToushiTime]

Thanks. So according to those links you provided:

There will no longer be a time limit on the tax exempt status of NISA investments.

Regular NISA and tsumitate NISA accounts will automatically convert into "New NISA" accounts which can comprise both installment-type investments (like the old tsumitate NISA) and lump-sum investments (like the regular NISA).

I can invest up to 3.6 million yen a year (1.2 million for installment type + 2.4 million for lump-sum) with the lifetime investment amount capped at 18 million yen (including a 12 million cap for lump-sum).

For Tsumitate NISA users, the annual limit for contributions will rise from 400,000 to 3.6 million yen, when lump-sum investments are included.

That's a massive increase!!!

Edit: I am not sure about the automatic conversion. That was an assumption. Please correct me if you know otherwise.

[ToushiTime]

Now, instead of ending in 2037, tsumitate NISA will end in 2042, with that final year being tax free until 2061.

The New NISA replaces tsumitate NISA, so the system will end at the end of this year. The 2023 tsumitate NISA will be tax-free until the end of 2042.

Are you sure that the removal of the tax exempt time limit will not apply retroactively to existing Tsumitate NISA investments?

[RetireJapan]

Are you sure that the removal of the tax exempt time limit will not apply retroactively to existing Tsumitate NISA investments?

Yes, the new system has nothing to do with the old one.

[adamu]

Edit: I am not sure about the automatic conversion. That was an assumption. Please correct me if you know otherwise.

You mostly got it. No details have been confirmed yet, so we're all just guessing.

I would clarify that existing investments up to this year would not be "converted" to the new rules, but it's likely people with existing accounts will be able to invest under the new rules from next year without applying for a new account (but again, it's just a guess).

[ToushiTime]

Thanks,

So, that means: before December 2040, l have to sell off all the Tsumitate NISA investments I will have made between 2021, when I started, and December 2023/January 2024 when I finish and switch to the new NISA?

I guess Rakuten will have to give us two separate records to manage the old and new NISA (which will likely contain mostly the same investment products in my case)?

I looked but couldn't find evidence that
a) the investment amount limits reset to zero for everybody when the new system starts
b) the tax-exempt time limit won't be removed for the legacy NISA when the new system starts

Does anyone have links for that?

[adamu]

There are no details beyond what's already provided above. You'll have to wait for the lawmakers to decide what the rules are, like the rest of us.

So, that means: before December 2040, l have to sell off all the Tsumitate NISA investments I will have made between 2021, when I started, and December 2023/January 2024 when I finish and switch to the new NISA?

You don't need to sell anything.

Existing investments up to this year will become taxable as their tax free period expires, according to the original rules. For investments made this year in Tsumitate NISA, that's 20 years from now until the end of 2042.

New investments from next year will be tax free under the new rules.

This is all speculative until we have more official details.