How Stock Trading is Taxed in Japan: A Guide for Foreigners

The flat 20.315% tax rate — 株式譲渡益の税率

In Japan, profits from selling stocks and other listed securities are taxed at a flat rate of 20.315%, regardless of how much you earn. Unlike your employment income (which is taxed on a progressive scale from 5% to 45%), investment gains are always the same rate. This is known as 申告分離課税 (separate self-assessment taxation).

The 20.315% breaks down into three components:

The reconstruction tax (復興特別所得税) was introduced after the 2011 Great East Japan Earthquake to fund recovery efforts. It is 2.1% of the 15% income tax portion, which equals 0.315%. This surtax is currently scheduled to continue through 2037.

Practical example: You buy shares of a Japanese stock for ¥1,000,000 and sell them for ¥1,500,000. Your capital gain is ¥500,000. The tax is ¥500,000 x 20.315% = ¥101,575. You keep ¥398,425 of your profit.

Three types of brokerage accounts — 口座の種類

When you open a brokerage account in Japan, you must choose one of three account types. This choice determines how your taxes are handled and whether you need to file a tax return for your investment income. This is one of the most important decisions you will make, so understand each option before choosing.

The overwhelming recommendation for most foreigners: choose 特定口座(源泉徴収あり). Your broker automatically calculates your gains, withholds the exact tax amount, and pays it to the tax office on your behalf. You never have to think about your stock taxes, and you are not required to include these gains on a tax return. It is the simplest, most hands-off option.

The 一般口座 (general account) is almost never the right choice. You would need to calculate every trade's gain or loss yourself, keep all records, and file everything on your tax return. There is no practical advantage to using it unless you are dealing with unusual securities that cannot be held in a 特定口座.

How 特定口座(源泉徴収あり) works — 源泉徴収の仕組み

When you use a 特定口座 with 源泉徴収あり (withholding at source), the entire tax process is automated. Here is what happens behind the scenes every time you sell:

How dividends are taxed — 配当金の課税

Dividends from Japanese listed stocks are also taxed at 20.315% by default, withheld at the source before the dividend reaches your account. However, you actually have three choices for how dividends are taxed. The best option depends on your total income:

Option 1: 源泉徴収で完結 — This is the default. Tax is withheld at 20.315% when the dividend is paid, and you are done. No filing, no paperwork. For most salaried foreigners, this is the simplest and often the best choice.

Option 2: 総合課税 — You include dividends in your total income and apply the progressive income tax rates. You also get a 配当控除 (dividend tax credit) of 10% of the dividend amount for Japanese domestic stocks. If your total taxable income is below roughly ¥9,000,000, the effective tax on dividends through 総合課税 can be lower than the flat 20.315%. However, adding dividend income to your total may push you into a higher bracket or affect other deductions. You must file 確定申告 to use this method.

Option 3: 申告分離課税 — The rate is the same 20.315%, but by filing this way, you can offset dividend income against capital losses (損益通算). If you sold stocks at a loss, you can reduce or eliminate the tax on your dividends. This is useful in years when you have significant realized losses.

Foreign stocks and the foreign tax credit — 外国株式と外国税額控除

Many foreigners in Japan invest in US stocks, ETFs, or other foreign securities through Japanese brokers like SBI or Rakuten. The capital gains from selling foreign stocks are taxed exactly the same as Japanese stocks: 20.315% flat rate, automatically handled if you use 特定口座(源泉徴収あり).

However, dividends from foreign stocks create a double taxation problem. When you receive dividends from a US stock, for example:

• The US withholds 10% of the dividend at source (under the Japan-US tax treaty; without the treaty, it would be 30%)
• Japan then taxes the remainder at 20.315%
• Your total tax burden becomes roughly 28.3% (10% US + ~18.3% Japan on the remaining 90%)

To avoid this double taxation, Japan offers the 外国税額控除 (foreign tax credit). By filing 確定申告, you can credit the foreign tax paid against your Japanese tax liability. In effect, the US-withheld 10% reduces your Japanese tax by the same amount, so your total tax stays close to 20.315% rather than 28.3%.

To claim the 外国税額控除, you must file 確定申告 and attach the 外国税額控除に関する明細書 (foreign tax credit statement). Your broker will provide a 年間取引報告書 (annual transaction report) showing the foreign taxes withheld.

Loss offsetting and carryforward — 損益通算と繰越控除

Japan allows you to offset investment losses against gains to reduce your tax bill. There are two mechanisms:

損益通算 — Same-year offsetting

Within the same calendar year, you can net capital gains against capital losses. You can also offset dividend income against capital losses if you elect 申告分離課税 for your dividends. Within a single 特定口座(源泉徴収あり), this happens automatically. Across multiple brokers, you must file 確定申告.

繰越控除 — Loss carryforward (up to 3 years)

If your net result for the year is still a loss after offsetting, you can carry that loss forward for up to 3 years (上場株式等に係る譲渡損失の繰越控除). In future years, the carried-forward loss offsets gains, potentially reducing or eliminating your tax.

Example: In 2025, you have a net loss of ¥2,000,000 from stock trading. In 2026, you make a ¥1,500,000 gain. Instead of paying tax on the full ¥1,500,000, you offset it with the carried-forward loss, leaving only zero taxable gain (and ¥500,000 loss still available to carry into 2027).

When to file 確定申告 even with 源泉徴収あり — 確定申告した方がいい場合

If you use 特定口座(源泉徴収あり), you are not required to file a tax return for your investment income. However, there are several situations where filing voluntarily can save you money:

• You have accounts at multiple brokers — gains at one broker cannot automatically offset losses at another. Filing lets you combine them and get a refund for over-withheld tax.
• You had a net loss this year — filing establishes the loss for the 3-year carryforward, which can offset future gains.
• Your total income is low — if your total taxable income (including employment) puts you in a tax bracket below 20.315%, choosing 総合課税 for dividends could result in a lower effective rate. This is especially relevant for part-time workers, students, or those who arrived/left mid-year.
• You received foreign stock dividends — filing lets you claim the 外国税額控除 (foreign tax credit) and recover the double-taxed amount.
• You want to offset dividends against capital losses — only possible through 申告分離課税, which requires filing.

The NISA advantage — NISA口座なら非課税

Everything discussed above — the 20.315% tax, account type choices, dividend taxation, filing decisions — does not apply to investments held in a NISA account. NISA (少額投資非課税制度) makes all capital gains and dividends from investments within the account completely tax-free.

Under 新NISA (the current system since January 2024), you can invest up to ¥3,600,000 per year (¥1.2M in つみたて投資枠 + ¥2.4M in 成長投資枠), with a lifetime limit of ¥18,000,000. All gains within these limits are permanently tax-free — no matter how much they grow.

The impact is significant. On a ¥10,000,000 investment that doubles to ¥20,000,000 over 15 years:

• In a taxable 特定口座: you pay ¥10,000,000 x 20.315% = ¥2,031,500 in tax
• In NISA: you pay ¥0 in tax

For most foreigners in Japan, the optimal strategy is: maximize NISA first, then use 特定口座(源泉徴収あり) for anything beyond the NISA limits. There is no reason not to use NISA if you are eligible — and virtually all foreign residents with a valid visa are eligible.

Frequently Asked Questions — よくある質問