Outline of Taxes on Interest Income and Capital Gains on Stocks

Type of Interest Income

Outline

(Memorandum) before March 1988

Income tax

Inhabitants tax

Interest
Income

Interest from fixed-term deposits and bonds, dividends of profits from jointly administered investment trusts and bond investment trusts

Separate withholding taxation at source
(20% withholding at source including 5% inhabitants tax)

Comprehensive income taxation (20 % withholding at source)

Comprehensive income taxation

Optional separate withholding taxation at source (35% withholding at source)

Non-taxable

Interest from demand deposits, such as ordinary deposits and deposits at notice

Filing of tax return not required (20% withholding at source)

Non-taxable

Non-taxable system

The system of non-taxable small denomination savings of the elderly (the limit of 3.5 million yen)
The system of non-taxable postal savings of the elderly (the limit of 3.5 million yen)
The system of non-taxable small denomination bonds for the elderly (the limit of 3.5 million yen)
The system of non-taxable savings for the accumulation of property and the acquisition of dwelling houses (pensions) (the limit of 5.5 million yen)

The system of non-taxable small denomination savings (the limit of 3 million yen)
The system of non-taxable postal savings (the limit of 3 million yen)
The system of non-taxable small denomination bonds (the limit of 3 million yen)
The system of non-taxable savings for the accumulation of property and the acquisition of dwelling houses (pension) (the limit of 5 million yen)

Type of Stocks

Outline

(Memorandum) before March 1988

Capital
gains
on
stocks

Listed Stocks

Every transaction, Choice between separate taxation upon filing tax return and separate withholding taxation at source, as follows.
(1)

Separate taxation upon filing tax return

Taxation on capital gains at the rate of 20% (26%, inclusive of inhabitants tax) upon filing a tax return;
However, the choice of separate withholding taxation at source in (2) below is not allowed if the stocks acquired before being listed are sold within a year from being listed. The capital gains are taxed according to the following conditions, depending on the length of the holding period;
(a)

The holding period is less than 3 years at the time of listing ----------- tax levied on the entire capital gains
(b)

The holding period is 3 years or more at the time of listing ----------- tax levied on one half of the capital gains
(2)

Optional separate withholding taxation at source

5.25% (1996.4.1 -- 2001.3.31) of the sales proceeds is deemed income (2.5% in the case of convertible bonds, the profits in the case of margin transactions), and is taxed at the rate of 20% at source (exempted from inhabitants tax)

Non-taxable , in principle

 

 

 

Comprehensive income taxation
continuous transactions
large scales
equivalent of enterprise sales
special reporting stock issues
concerted buying

Other stocks

Separate taxation upon filing tax return

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