[Japan Finances] Let’s think which is value to try? NISA or Tsumitate NISA
2021.08.08 Updated
Finish to read: 10 min
Today’s topic: I will explain who should use regular NISA or Tsumitate NISA.
I recommend NISA if you have experience in investing and have money to invest more than 0.4 million JPY per year.
I recommend Tsumitate NISA if you want to start investing with smaller amounts, up to 33,333 JPY per month, or if you prefer to invest long-term.
Hi there, Kinkajuu here.
Have you ever heard of NISA or Tsumitate NISA (Reserve積立NISA)? Today’s topic is about these NISA accounts. Let’s take a look at what they are and how they can work for your finances in Japan.
In my case, I, a female in my 30s, chose to use a Tsumitate NISA account and I’ll explain my reasons for doing so in this post.
- What are NISA and Tsumitate NISA? How are they different?
- NISA is a tax-free investment account for people aged 20 and over living in Japan
- You have to choose just one account from NISA or Tsumitate NISA.
- You cannot report total profit and loss on your taxes for these accounts
- If the investment realized a loss, you do not get any benefit
- Can withdraw at any time
- NISA is a tax-free investment account for people aged 20 and over living in Japan
- NISA’s Features
- Avoid paying capital gains tax on investments of 1.2 million JPY per year
- The longest term of an account is 5 years
- Can rollover
- Tsumitate NISA’s Features
- Avoid paying capital gains tax on investments of 0.4 million JPY per year
- The longest term of an account is 20 years
- NISA’s Advantages and Disadvantages
- Advantages
- Disadvantages
- Tsumitate NISA’s Advantages and Disadvantages
- Advantages
- Disadvantages
- Which should you choose if you come to Japan and start investing?
- Think about your risk tolerance first
- Who should use NISA
- Ability to invest more than 0.4 million JPY (33,333 per month)
- Have experience in investing
- Who should use Tsumitate NISA
- Beginner investors
- Prefers long-term investments
- Who should use NISA
- Think about your risk tolerance first
1. What are NISA and Tsumitate NISA? How are they different?
NISA is a tax-free investment account for people aged 20 and over living in Japan.
You have to choose just one account from NISA or Tsumitate NISA.
There are two types of NISA accounts and you have to choose just ONE account. That’s unfortunate, but being able to use even one free-tax investment account is amazing!
You cannot report total profit and loss on your taxes for these accounts.
Japan’s tax system normally allows you to offset investment profits with losses. For example, Account A has a profit of 100 JPY but Account B has a 30 JPY loss. You would pay tax on only 70 JPY (100 profit – 30 loss).
Unfortunately, you cannot use this offset with NISA accounts.
Even you realized huge losses in your NISA account and have a profit on another account, you must pay tax on the full profit.
If the investment realized a loss, you do not get any benefit.
The NISA system allows you to ignore capital gains tax on your investment profits. But if you realize a loss, there is no benefit.
Of course, you should start with the basics of personal finance – build up an emergency fund (of 6-12 months) in a safe account (savings, fixed term deposit, etc). However, returns in these accounts are very low and will not beat inflation.
For example, if inflation is 1% per year, the 0.001% return on saving accounts cannot come close to matching it. Your money in savings account is effectively losing value to inflation. So, in order to protect yourself from inflation, you need to seek higher returns – usually from investment in the stock market.
Can withdraw at any time
In contrast with iDeCo accounts, you can withdraw money from either type of NISA account at any time.
*iDeCo is “The individual-type defined contribution pension plan (iDeCo) is a private-pension plan governed by the Defined Contribution Pension Act.” (Ministry of Health, Labour and Welfare: https://www.ideco-koushiki.jp/english/)
コメントを残す