Against the backdrop of booming stock transactions in recent weeks, an increasing number of individual investors are opening “special accounts” for stocks at securities companies.

The special account system was devised by securities companies to make it easier for stock investors to file tax returns, according to the brokerages.

It came into being after a new unified capital gains tax took effect in January.

The new taxation system has abolished the option of “separate taxation at source,” under which 1.05 percent of the proceeds from selling stocks was taxed and investors did not have to file a final return.

The new system adopts “separate self-assessment taxation” as the sole taxation of capital gains on stocks, requiring every stock investor in principle to file a final tax return.

Under the new system, securities houses can stand in for their clients to take care of final tax return paperwork if investors decide to have tax withheld at the source.

The special account was not initially popular with investors, in part because tax rates differed depending on when an investor sold stocks and how long the stocks were held.

Many investors left the stock market because of the Byzantine tax rates.

The rates were later simplified, but the shift to special accounts remained slow as stock prices continued to fall.

Applications for opening special accounts began to increase in April, when a rule change made it possible for investors to transfer to a special account stocks not held in a general account.

The move gained momentum following the sharp increase in business on the Tokyo Stock Exchange.

The daily trading volume on the first section of the Tokyo Stock Exchange has been at more than 1 billion shares for the last month or so.

Seeing the sharp rise in stock prices, many investors who had received dividends on their stockholdings by the end of June began to consider reshuffling their portfolios. This caused a sharp increase in applications for special accounts, a salesman at a midsize securities company said.

Investors who continue stock transactions without opening special accounts have to go through cumbersome procedures in filing tax returns, such as calculation of the stock purchase prices and gains or losses on stock sales.

For this and other reasons, industry insiders recommend that individual investors open special accounts.

The new securities taxation system has made more options available to investors.

For instance, when an investor forgets the price of a stock he purchased a long time ago, the system allows him to file 80 percent of the stock’s closing price on Oct. 1, 2001, as a “deemed acquisition price” of the stock.

Also, an investor who opts for withholding tax at the source can carry over stock transaction losses for up to three years.

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