If I incur investment losses in a NISA account, can they be offset against other investment gains for tax purposes?

Okay, regarding whether losses in a NISA account can be tax-deductible, let me explain.

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Can Investment Losses in a NISA Account Be Offset Against Other Profits for Tax Purposes?

Let's start with the conclusion: No, they cannot.

Losses incurred within a NISA account cannot be offset against profits you make in other securities accounts (such as a "Specific Account" or "General Account") through a process called "損益通算" (offsetting losses and gains).

Why is this the case?

You can think of a NISA account as a "tax-free special zone" or an "independent tax-exempt piggy bank."

1. Advantage: No Tax on Profits

   • The biggest benefit of NISA is that any money you earn from selling stocks or funds (capital gains) or dividends received within this account are completely tax-exempt. The tax authorities simply disregard this income.

2. Disadvantage: Losses are Also Disregarded

   • Precisely because this account is "tax-exempt," the tax authorities "turn a blind eye" to all activities within it. If you make a profit, they don't collect tax; similarly, if you incur a loss, they will not acknowledge your loss.
   • Therefore, this loss cannot be used to offset the taxes you owe on profits earned elsewhere (for example, in your Specific Account).

Let's illustrate with an example

Suppose your investment situation for the year is as follows:

• NISA Account: Loss of 100,000 JPY
• Specific Account (withholding tax applied): Profit of 300,000 JPY

What will be the result?

You will still need to pay tax on the full 300,000 JPY profit in your Specific Account (approximately 20.315%, or over 60,000 JPY). The tax authorities will not allow you to pay tax on only 200,000 JPY of profit just because your NISA account lost 100,000 JPY. The NISA loss is simply "lost" without any tax benefit.

What if the loss occurred in a regular account?

In contrast, if both of your accounts were Specific Accounts:

• Specific Account A: Loss of 100,000 JPY
• Specific Account B: Profit of 300,000 JPY

In this scenario, you could perform "損益通算" (offsetting losses and gains). Your total investment income for the year would be calculated as 300,000 - 100,000 = 200,000 JPY. You would only need to pay tax on this 200,000 JPY profit.

To summarize

• NISA Account: An independent tax-exempt system. Profits are not taxed, and losses are not included in tax calculations.
• Other Taxable Accounts (Specific Account/General Account): Profits are taxed, so losses can be used to offset profits, thereby reducing your tax burden.

Choosing to use NISA means you are leveraging its significant advantage of "tax-free profits," but at the same time, you must accept the rule that "losses cannot be tax-deductible." It's two sides of the same coin.