Hi all, I’m in a little bit of a predicament where I have two securities accounts- Rakuten & Fidelity (used by my employer for company RSUs). I have a significant amount of shares in both accounts with all shares in Rakuten under 特定. All shares are USD-based (i.e. trading on NYSE etc) and bought with JPY through Rakuten, or just vested naturally on Fidelity.
I sold a portion of the shares on Fidelity this year at a loss, and am planning to sell some more soon which will be at a gain. I have a large investmet on Rakuten that I also want to cut my losses on, keep the cash in USD and throw it back into something else.
I’m incredibly confused with how this will play out, and if there’s a ‘clever’ move to make given there’ll be a substantial loss from the investment on Rakuten. I.e. if I sell some shares with a 1m JPY loss, should I also sell some at profit to cancel anything out? Does it even work like that?
I know on Rakuten if I sell at a profit they keep the capital gains taxes given it’s a 特定 account, but since I’d be selling at a loss how does this work if no additional profitable sales are made? Given that I’d likely be selling at a profit on Fidelity, is there any sort of ‘cancelling’ out, and if so by how much and how do I mark this on my 確定申告?
I’m aware this is likely not an easy question to answer but any hints at what to look into or search would be helpful!
PS: Not a US citizen.
by ViralRiver
2 comments
> if I sell some shares with a 1m JPY loss, should I also sell some at profit to cancel anything out?
Yes, that would typically be a sensible strategy, especially if the loss was realized via a foreign brokerage. Losses realized via Japanese brokerages can be carried forward for up to three years, so you can use them to offset the tax due on gains you make in the future. Whereas losses realized via foreign brokerages cannot be carried forward, so you would need to realize a gain in the same calendar year as the loss, in order to “harvest” the loss for tax purposes.
> given it’s a 特定 account, but since I’d be selling at a loss how does this work if no additional profitable sales are made?
Assuming it’s a “withholding”-type 特定 account, the way it works is that the brokerage calculates your annual tax liability at the end of each trading day, and ensures that they hold an amount of tax that exactly corresponds to that liability. But they will only take into account transactions made within the account, of course.
So if you make a profit (receive a dividend, sell at a gain, etc.) in January, the brokerage will withhold 20.315% from that profit. But if you then make a equivalent loss in December, for example, the brokerage will refund you the 20.315% they withheld in January, because your tax liability for the year has changed.
It is possible to offset gains/losses realized in 特定 accounts against gains/losses realized in other accounts (including foreign brokerage accounts), but to do so it is necessary to file an income tax return and manually declare all the relevant transactions. You can’t rely on the brokerage to handle everything for you. (The same goes for the carrying forward of losses.)
> how do I mark this on my 確定申告?
It’s hard to explain in words, but if you go through the process of declaring your transactions using the NTA’s online [tax return preparation tool](https://www.keisan.nta.go.jp/kyoutu/ky/sm/top#bsctrl), it should be fairly clear how the losses and gains offset each other. The current paper version of the form is [here (PDF)](https://www.nta.go.jp/taxes/shiraberu/shinkoku/syotoku/pdf/r04_joto_18-1.pdf), but the online tool is easier to understand imho.
Though note that if you realized losses via a foreign brokerage and there are insufficient gains to offset those losses, you are not allowed to use the online tool to prepare your income tax return (you must submit a paper return instead), at least with respect to 2022. This is because the current version of the tool has not been built to accommodate losses realized via a foreign brokerage except to the extent those losses are fully offset by gains in the same calendar year. The 2023 version of the tool has not been released yet, though, so it is possible that this limitation will be removed in the future.
I’m not sure on how the RSUs work, tax-wise, but if they work like a stock/ETF, specific dates for conversion into equivalent yen values can be important. With the weakening yen, a loss may not be as large as it might have first appeared to be. Make sure of what the loss is in yen so you know how much needs to be offset.