Are taxes levied on stock purchases in Japan?

Alright, no problem. Let me break down the tax implications of buying and selling stocks in Japan for you, trying to keep it as simple and easy to understand as possible.

Do You Really Have to Pay Tax When Buying Stocks in Japan?

The simple and direct answer is: Buying stocks itself is not taxable, but if you make a profit from selling stocks or receive dividends from a company, then you will need to pay tax.

Think of it like getting paid for work: you only pay tax on the money you earn (stock gains) after you receive your salary, not when you start working (buy stocks).

Mainly, two types of taxes are involved:

Capital Gains Tax (譲渡所得税 - Jōto Shotokuzei): When you sell stocks for a price higher than what you bought them for, the profit you make is subject to this tax.
Dividend Tax (配当所得税 - Haitō Shotokuzei): If the company whose shares you hold decides to distribute dividends to shareholders, the dividends you receive are also subject to tax.

The current tax rate is approximately 20.315% (National Tax + Local Tax + Special Surcharge for Reconstruction).

“Sounds Complicated, What If I'm Bad at Math?” — Don't Worry, There's a “Foolproof” Solution

Japanese securities firms (like Rakuten Securities, SBI Securities, etc.) are very user-friendly. To make investing easier for everyone, they offer different types of accounts. As long as you choose the right account, tax issues become very simple.

When opening an account, you'll encounter a few options, the most crucial of which is the following:

Specific Account (特定口座 - Tokutei Kouza)

This is the account type most people choose, and it can be understood as a “tax-simplified account.” It comes in two variations:

Withholding Tax Applied (源泉徴収あり - gensen chōshū ari) - “Fully Automatic Withholding” Mode
- Highly recommended for beginners!
- After you sell stocks and make a profit, the securities firm will automatically calculate how much tax you need to pay, deduct it directly from your profits, and pay it to the tax authorities on your behalf. The same applies to dividends; the tax will be automatically deducted.
- Pros: You don't have to worry about tax issues at all, and you don't need to file your own tax return (確定申告 - kakutei shinkoku). For most people, this is the most hassle-free and convenient option.
No Withholding Tax (源泉徴収なし - gensen chōshū nashi) - “Semi-Automatic” Mode
- The securities firm will calculate your total gains or losses for the entire year and issue an annual transaction report.
- However, the securities firm will not withhold taxes on your behalf. You will need to take this report and file your own tax return (確定申告) with the tax office in early spring of the following year.
- Pros: Suitable for experienced investors who need to file taxes to handle other income (e.g., side jobs) or carry forward losses (offsetting this year's losses against profits for the next three years). Beginners generally won't need this.

General Account (一般口座 - Ippan Kouza)

This is the “fully manual” mode. You need to record all information for every transaction yourself, including purchase price, selling price, date, fees, etc., then calculate your annual gains and losses, and file your own tax return. It's very troublesome and completely unrecommended unless you have specific needs.

“Is There Any Way to Be Completely Tax-Exempt?” — Yes! Take Advantage of Government Benefits

To encourage public investment, the Japanese government has introduced a “god-tier” system called NISA (ニーサ).

NISA can be understood as a “tax-exempt investment account.”
There's a certain tax-exempt investment limit each year (for example, with the new NISA starting in 2024, the growth investment limit is 2.4 million JPY, and the Tsumitate NISA limit is 1.2 million JPY).
As long as you buy stocks or funds within this limit, any future profits from selling them or any dividends received will be completely tax-free!
This benefit is a huge advantage for everyone residing in Japan.

Your Final Advice

First Step: Immediately open a NISA account with a securities firm. This is your top priority; make full use of this tax-exempt limit.
Second Step: If your investment amount exceeds the NISA limit, then when opening an account, choose a Specific Account (Withholding Tax Applied) for the excess amount.
And that's it! After that, you can confidently buy and sell stocks, and the securities firm will handle all your tax matters perfectly.

To summarize: feel free to invest. Tax issues only need to be considered after you make a profit, and as long as you choose the right accounts (NISA + Specific Account with Withholding Tax Applied), you'll hardly have to worry about anything.