Three Types of Brokerage Accounts
In Japan, you can open three types of brokerage accounts: a Tokutei account (specific account with tax withholding), a Tokutei account (without tax withholding), and an Ippan account (general account). In addition, you can open a NISA (Nippon Individual Savings Account) account. The most popular choice among investors is the Tokutei account with withholding, where the brokerage automatically calculates and deducts taxes on capital gains and dividends, eliminating the need for a tax return in most cases.
The Tokutei account without withholding means the brokerage prepares an annual trading report, but you must calculate and pay taxes yourself through a tax return. The Ippan account requires you to manage all trading records and file tax returns entirely on your own, offering no practical advantage unless you have a specific reason.
Tax Simulation by Account Type
Let's compare a scenario where you earn 30 man-yen in profit on a 100 man-yen investment. In a NISA account, the tax is zero and the full 30 man-yen stays in your pocket. In a Tokutei account with withholding, 30 man-yen × 20.315% = 60,945 yen is automatically deducted, leaving 239,055 yen. The tax amount is the same for a Tokutei account without withholding or an Ippan account, but you must pay it yourself through a tax return.
This difference compounds significantly over time. If you earn 30 man-yen in profit every year for 20 years, a NISA account preserves the full cumulative profit of 600 man-yen, while a taxable account deducts approximately 122 man-yen in taxes. This is precisely why NISA should be your top priority.
Recommended Account Setup
For beginning investors, the recommended setup is a NISA account combined with a Tokutei account (with withholding). First, maximize your NISA tax-free allowance, then invest any excess in the Tokutei account. With this setup, NISA profits are tax-free, Tokutei account profits are automatically taxed, and you never need to file a tax return.
If you hold accounts at multiple brokerages, note that you can only have one NISA account per person. You can open Tokutei accounts at multiple brokerages, but offsetting gains and losses across brokerages requires filing a tax return. For simplicity, consolidating at a single primary brokerage is the most efficient approach. Brokerage account opening guides cover the key comparison points for online brokerages and walk you through the account opening process.
When Filing a Tax Return Is Beneficial
Even with a Tokutei account with withholding, filing a tax return can be advantageous in certain cases. If your annual salary income is low and your income tax rate is 5%, you can receive a refund for the difference from the 15.315% withheld at source. Filing is also necessary when offsetting gains and losses across multiple accounts or carrying forward losses.
However, filing a tax return may affect spousal deductions or national health insurance premiums, so consider the overall impact. In particular, if a spouse who is claimed as a dependent files a return, the increased income could disqualify them from dependent status. Tax return guides for investors clarify the differences in tax treatment by account type.
Next Steps - Open an Account and Start Investing
If you do not yet have a brokerage account, open a NISA account and a Tokutei account (with withholding) simultaneously at an online brokerage. Account opening is free and can be completed entirely online. Once opened, simply set up automatic monthly contributions to a global equity index fund in your NISA account, and your wealth-building journey begins.
Try our simulator to compare the results of investing through a NISA account versus a taxable account. Once you see the tax-free advantage in actual numbers, you will realize there is no reason not to use NISA.