FXの損益通算を徹底解説！税金対策と申告ガイドComprehensive Guide to FX Loss Offsetting: Tax Strategies & Filing

While FX trading offers the potential for high returns, it also inherently carries the risk of losses. If you've incurred losses, are you resigned to thinking you still have to pay taxes on any gains? In fact, properly managing FX losses can significantly reduce your tax burden. This is made possible through systems known as "loss offsetting" and "carry-forward losses."

This article will thoroughly explain everything FX traders need to know, from the basics of loss offsetting and its practical application to the steps for tax filing and important considerations. Deepen your tax knowledge and engage in smart FX trading.

What is FX Loss Offsetting? Understanding the Basics

Profits earned from FX (Foreign Exchange Margin Trading) are generally treated as "miscellaneous income related to futures transactions, etc." and are subject to "separate self-assessment taxation," where a uniform tax rate is applied independently of other income. The tax rate is a flat 20.315% (15% income tax, 0.315% special reconstruction income tax, and 5% local inhabitant tax).

Loss offsetting is a system that allows you to reduce your overall income by offsetting profits from one financial product with losses from another, thereby reducing your tax burden. In FX trading, loss offsetting is applicable only between financial products categorized under the same "miscellaneous income related to futures transactions, etc."

For example, if you made a profit of 1 million JPY in one FX account and incurred a loss of 500,000 JPY in another FX account in the same year, you can offset these two amounts, reducing your taxable income to 500,000 JPY. This means taxes will only be levied on 500,000 JPY, leading to significant tax savings.

Why Can't FX Be Offset Against Other Income?

Income generated from FX trading is classified under a specific income category: "miscellaneous income related to futures transactions, etc." Since this falls under "separate taxation"—distinct from other income types like employment income, business income, or real estate income—it generally cannot be offset against these other income categories. Furthermore, it cannot be offset against financial products subject to different separate taxation schemes, such as stocks or investment trusts.

Therefore, when considering FX loss offsetting, it is crucial to understand that only transactions falling under the same "miscellaneous income related to futures transactions, etc." are eligible.

Eligible and Ineligible Financial Products for Loss Offsetting

To properly utilize FX loss offsetting, it is essential to accurately identify which financial products are eligible and which are not.

Main Eligible Financial Products (Miscellaneous Income Related to Futures Transactions, etc.)

FX trading can be offset against the following financial products. All of these are categorized as "miscellaneous income related to futures transactions, etc."

• Domestic FX Trading: All margin transactions.
• CFD Trading: Contract for Difference (e.g., stock index CFDs, commodity CFDs).
• Nikkei 225 Futures and Options Trading: Stock index futures, options trading.
• Commodity Futures Trading: Futures trading for crude oil, gold, grains, etc.
• Crypto Asset FX/Futures Trading: Margin trading and futures trading of crypto assets through domestic financial instrument business operators (spot trading is considered general miscellaneous income).

Profits and losses from these financial products can be aggregated over the year to calculate the final income.

Main Ineligible Financial Products (Different Income Categories)

These financial products and income types cannot be offset against FX trading profits/losses because they belong to different income categories.

• Stock Investments: Capital gains from listed stocks (separate self-assessment taxation).
• Investment Trusts: Treated similarly to listed stocks (separate self-assessment taxation).
• Real Estate Investments: Real estate income (comprehensive taxation).
• Employment Income / Business Income: Comprehensive taxation.
• Overseas FX Trading: Generally treated as "miscellaneous income" subject to comprehensive taxation and cannot be offset against domestic FX.

It is important to note that loss offsetting is not possible between financial products belonging to different income categories.

Benefits of Loss Offsetting and Tax-Saving Effects: Up to 3 Years of Carry-Forward Losses

FX loss offsetting not only reduces your tax burden for the current year but also offers significant benefits that can impact your future taxes.

Mechanism of Carry-Forward Losses

If losses incurred in FX trading for a given year exceed profits from other "miscellaneous income related to futures transactions, etc.," the system of "carry-forward losses" allows these carried-forward losses to be deducted from profits in the same income category for up to three subsequent years. This applies if you continue to file tax returns annually.

Concrete Example:

• Year 1: Incurred a 1,000,000 JPY loss in FX. Filed a tax return.
• Year 2: Earned a 500,000 JPY profit in FX. Deducted 500,000 JPY from the 1,000,000 JPY loss from Year 1, resulting in 0 JPY taxable income. The remaining 500,000 JPY loss is carried forward to the next year.
• Year 3: Earned a 300,000 JPY profit in FX. Deducted 300,000 JPY from the 500,000 JPY carry-forward loss from Year 2, resulting in 0 JPY taxable income. The remaining 200,000 JPY loss is carried forward to the next year.
• Year 4: Earned a 400,000 JPY profit in FX. Deducted the 200,000 JPY carry-forward loss from Year 3, resulting in 200,000 JPY taxable income. Taxes are levied on this remaining 200,000 JPY profit.

By utilizing the carry-forward loss system, you can effectively use losses to significantly reduce taxes on future profits. However, it is crucial to file a tax return not only in the year the loss occurred but also every year thereafter during the loss carry-forward period.

Steps for Loss Offsetting and Key Points for Tax Filing

To benefit from loss offsetting and carry-forward losses, filing a tax return is mandatory.

1. Calculate Annual Profits and Losses: Based on "Annual Transaction Reports" or "Payment Records" issued by each FX company or CFD broker, calculate your annual profits and losses. If you use multiple brokers, aggregate the profits and losses from each.
2. Prepare Your Tax Return: Obtain the income tax return form (Form 3: For Separate Taxation) from the National Tax Agency's website and fill in the necessary information. You can easily file from home using e-Tax.
   • To claim carry-forward losses: In addition to Income Tax Return Form 3, you must also submit the "Supplementary Sheet for Income Tax and Special Reconstruction Income Tax Return (for Carry-forward Losses Related to Futures Transactions).
3. Attach and Submit Required Documents: Submit your tax return to your local tax office, along with supporting documents such as annual transaction reports. The submission period is generally from February 16th to March 15th each year.

[Important] To qualify for carry-forward losses, you must file a tax return every year, starting from the year the loss occurred. Even if you had no profits in a given year and no tax liability, you must file a return if you wish to carry forward losses.

Important Considerations and FAQs Regarding Loss Offsetting

Tax Differences Between Domestic and Overseas FX

Domestic FX trading is subject to separate self-assessment taxation (20.315% tax rate) as "miscellaneous income related to futures transactions, etc." In contrast, profits from overseas FX trading are generally treated as "miscellaneous income" subject to comprehensive taxation, meaning they are aggregated with other income like employment income, and progressive income tax rates apply. Therefore, you cannot offset losses between domestic and overseas FX.

If your overseas FX profits are substantial, you could face a tax rate of up to 55% (including local inhabitant tax), making it crucial to understand these tax differences.

FX Trading with a Corporate Account

Unlike individual FX accounts, profits and losses from FX trading in a corporate account are subject to corporate tax calculations. For corporations, taxable income is calculated by aggregating profits and losses from other business activities, and different tax rates apply compared to individual income tax. Additionally, the loss carry-forward period for corporations is longer, up to 10 years.

What Happens if You Don't File a Tax Return?

If you make a profit from FX but fail to file a tax return, you may be subject to penalties such as additional tax for failure to file and delinquent tax. Furthermore, even if you incur a loss, you cannot benefit from carry-forward losses if you do not file a tax return. Remember that tax filing is the starting point for both tax payment and tax savings.

"Year-End Loss Realization"

If you hold positions with unrealized losses at year-end, settling them within the year to realize the loss allows you to offset it against that year's profits or carry it forward to subsequent years. This practice is known as "year-end loss realization" and is used as a smart tax strategy. However, it's crucial to make such decisions carefully as part of your overall trading strategy, rather than simply closing positions solely for tax purposes.

[Disclaimer]

1. Tax laws are subject to change, and we recommend checking for the latest information.
2. For detailed tax advice, we recommend consulting with a tax accountant or other professional.

Conclusion: Understand FX Loss Offsetting for Smart Tax Planning

FX loss offsetting and carry-forward losses are crucial tax strategies for traders. By correctly understanding and utilizing these systems, you can reduce unnecessary tax burdens and engage in more efficient investment activities. Especially when losses occur, consistently filing your tax return every year is the first step towards future tax savings.

Tax systems are complex, and the optimal strategy varies depending on individual circumstances. If you have any questions or concerns, always consult with a tax accountant or other professional, or your local tax office, to obtain accurate information. Equip yourself with appropriate tax knowledge to advance your FX trading even more favorably.

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