Your Ultimate NISA 2024 Q&A
Can I use the New NISA for Day Trading? What will happen to my old NISA? Can US citizens use the new NISA? All your burning NISA questions answered in this post
Happy New Year, investors! 2024 is finally here, and with it comes the game-changing new 2024 NISA (Small Investment Tax Exemption System).
We've all been eagerly waiting for this, and trust me, it's worth the hype! Japan is now home to perhaps the world's greatest tax-free investment savings account, and I'm super excited!
I've gathered all your burning questions about NISA's big makeover and packed them into this easy-to-digest Q&A:
KonichiValue’s New NISA 2024 Q&A🚀💰✨
Q: What are the key differences between the new NISA and the old NISA?
A: The new 2024 NISA, introduces major changes:
Increased Investment Limits: The total investment limit is raised to ¥3.6 million annually, or ¥18 million in total, up from ¥6 million for old NISA and ¥8 million for old Tsumitate NISA, under the current system.
Growth Investments: A part of this limit, ¥2.4 million annually, or ¥12 million max, is allocated for "Growth Investments," which refers to investments in stocks or other assets aimed at capital growth, as opposed to Tsumitate NISA which focuses on regular, long-term savings through mutual funds or ETFs.
Regular Savings Investments: The remaining ¥1.2 million annually, or ¥6 million total of the total limit is for "Regular Savings Investments," similar to the current Tsumitate NISA. This part of the investment is geared towards more stable, long-term savings options like mutual funds and ETFs.
Indefinite Tax Exemption: Unlike the current NISA's limited tax-exempt period (5 years for General NISA, 20 years for Tsumitate NISA), the new NISA offers an indefinite, lifetime tax exemption. But if you invest the ¥3.6 annually, it will take 5 years until you max out the investment quota.
Q: Can foreigners open a new NISA account?
Yes, absolutely! Foreigners living in Japan can indeed open a NISA account. But here's the deal: you need to be a resident, which generally means living there most of the year. Also, you've got to be paying taxes in Japan because the NISA's tax breaks are tied to Japanese tax laws. Don't forget the paperwork - you'll need a residence card, a Japanese bank account, and maybe a few other documents.
Q: I am currently investing in NISA. What should I do now when the new NISA is out?
A: If you're already investing in the current NISA, you seamlessly transition to the new NISA without opening a new account. Your current investments will be considered separately from the new NISA, allowing for a total non-taxable investment of up to ¥24 million (¥18 million for new NISA + ¥6 million for current NISA, if invested).
Be aware that the old NISA rules applies to your NISA investments pre-2023. That means that they will automatically move to a taxable account 5 years after the investments were made (e.g. investments made in 2019 were tax free until the end of 2023)
Q: Can’t I rollover the old NISA money to keep them tax-exempt for longer than 5 years?
It used to be possible to rollover the balance from an expiring 5-year NISA into the next year's NISA. However, as 2023 was the last year of the 5-year NISA, this is no longer possible. The assets in a NISA will be converted to a taxable account as the NISA expires.
Q: As a foreign citizen planning to work abroad, can I maintain my NISA account?
A: As a foreign citizen working abroad, maintaining a NISA account involves certain conditions:
Temporary Assignments: If your time abroad is less than 5 years, you might maintain the NISA account by submitting specific documents. However, new investments during this period are generally not allowed.
Transfer to a Taxable Account: If you exceed the 5-year period abroad or don't comply with the requirements, your NISA account will be transferred to a taxable account. This means that any future capital gains or dividends from the investments will be subject to taxation. However, the capital gains accumulated in the NISA account before the transfer won't be retroactively taxed. For example, if you earned ¥500,000 in capital gains while your investments were in the NISA account, this amount remains tax-exempt. Only gains made after the transfer to the taxable account are subject to taxes.
Q: I am planning to start NISA but might move abroad. What happens if I don't inform my financial institution and leave Japan?
A: If you relocate abroad without completing the necessary procedures, your NISA account might be frozen once your lack of a Japanese address is discovered. It's important to follow the proper procedures and inform your financial institution of any changes in your residency status to avoid issues with your NISA account.
Q: Can I reuse the tax-exempt limit if I sell my investments in the new NISA?
A: Yes, in the new NISA system, you can reuse the tax-exempt limit if you sell your investments. Here's a brief explanation of how it works:Imagine you've reached your NISA lifetime limit of 18 million yen. If you later sell part of your investments, say 5 million yen, your investment total drops to 13 million yen. You're then allowed to reinvest the 5 million yen to potentially reach the 18 million yen limit again.
However, you must adhere to the annual investment limits, which are 1.2 million yen for Tsumitate Quota and 2.4 million yen for Growth Quota, each year. So while you can reinvest following sales, you cannot exceed these annual limits in a given year
Q: Can the new NISA be used for Day Trading?
A: The new NISA system is not designed for day trading. If you invest the maximum annual limit of ¥2.4 million in the Growth Quota and then sell those investments within the same year, you won't be able to reinvest that amount until the next year.
The annual quota is replenished yearly, not immediately after you sell your investments. Therefore, if you sell in 2024, you can only reinvest that amount, along with the new annual limit, in 2025. The structure of the new NISA system promotes long-term investment rather than short-term or frequent trading .
Q: Do my current NISA or Tsumitate NISA holdings affect the new NISA's tax-exempt limit?
A: No, the assets held in the current NISA or Tsumitate NISA as of December 2023 will be managed separately from the new NISA starting in 2024. The balance of these assets will not affect the tax-exempt limit of the new NISA.
Q: I am a U.S. Citizen living in Japan. Can I use the new NISA 2024?
A: Yes, as a U.S. citizen living in Japan, you can participate in the NISA program. However, keep in mind that the U.S. does not recognize NISA as tax-exempt, so your investments will most likely be subject to U.S. taxation. On top of that, many Japanese securities companies do not accept applications from US citizens, so be aware of that too.
Thanks for Q&A. Helpful!
Does dividend income from NISA account get taxed at 20% ?