Small investors face tax on bond gains, break on stocks


The government and ruling bloc has decided to tax capital gains from bonds and bond investment trusts and lengthen tax breaks planned for dividends and capital gains from minor investments in stocks and stock investment trusts to 10 years instead of three, sources said Wednesday.

The new system, based on Britain’s Individual Savings Account, was supposed to start in January 2014 as a three-year measure to make up for a tax break on dividends and capital gains that expires at the end of this year. The break reduces the tax rate to 10 percent from 20 percent.

The extension of the system under the fiscal 2013 tax reform package will exempt up to ¥1 million per year from tax from 2014 to 2023 — with the tax-exemption period limited to five years per financial product.

The cumulative maximum amount subject to exemption will be ¥5 million over the 10-year period, the sources said.

The measure is designed to induce the public into taking more risk by investing more of its savings, which is mostly tied up in safe cash deposits.

For the same purpose, it also plans to modify a system that allows investors to offset profits with losses before the taxes are calculated.

But capital gains from investments in bonds and bond investment trusts, which are currently tax-exempt, will from here out be taxed in the new scheme, although the offsetting system will be allowed.

The modified system is scheduled to take effect in January 2016, the sources said.