Planning to buy your first property in Japan? Making a big-ticket purchase, especially in a foreign country may come with anxiety, but please do not worry! We have summarized frequently asked questions regarding the taxes and costs involved in a transaction from purchasing, renting out, to selling the property in Japan for you.
1. Can a foreigner buy property in Japan?
Yes, you can. A foreign resident or non-resident can buy property in Japan if the necessary documentation and funds are available. Foreign investors can buy almost all kinds of properties, including condominium, house, office, retail, industrial, warehouse and land, except for farmland which requires a special license. For the purchaser’s ownership rights, there are two types; freehold and leasehold. The difference between these two is who owns the ownership of the land on which the building stands.
For more detail, please read our article “Guidelines for Buying Properties in Japan”. Click here.
2. What are the differences between a resident and a non-resident?
A resident of Japan is a person who lives or has lived in Japan for at least a year. A non-resident, on the other hand, is a person who is not a resident and lives outside of Japan.
For more detail, please read our article “Guidelines for Buying Properties in Japan”. Click here.
3. Purchasing a property – what taxes and costs do I have to pay?
When you purchase property, you will need to pay several types of one-time tax and fee: (1) Consumption Tax and (2) Registration and License Tax, (3) Real Estate Acquisition Tax, and (4) Broker Fee. Consumption tax is levied only on building, not land. The rate is currently 10%. The taxes (2) and (3) are levied on the assessed value of the property.
For more detail, please read our article “Guidelines for Buying Properties in Japan”. Click here.
4. Holding a property – what taxes and costs do I have to pay?
After you have purchased a property, there are two types of taxes levied annually and usually paid quarterly: (1) Fixed Asset Tax and (2) City Planning Tax. While Fixed Asset Tax is levied on land, buildings and other depreciable fixed assets, City Planning Tax is only levied on the land and buildings within Urbanization Promotion Area. If your property is a condominium unit, you will also need to pay (1) management fee and (2) sinking fund to the condominium management association established for the maintenance of the condominium building.
For more detail, please read our article “Taxes and fees you need to pay while holding property in Japan”. Click here.
5. Renting out a property – what taxes and costs do I have to pay?
If you decide to rent out your property, income tax is levied on the rental income. How you pay the tax differs depending on whether you are a resident of Japan or not. If you are a resident, the rental income becomes part of your total income generated in Japan and the tax is calculated based on the total amount of your taxable income. If you are a non-resident, income tax is withheld by the tenant at the rate of 20.42% from the rent and the rest is remitted to your account. You will need to submit final tax return to settle the tax amount via a tax agent you appoint.
For more detail, please read our article “Taxes and fees you need to pay when renting out your property in Japan”. Click here.
6. Selling a property – what taxes and costs do I have to pay?
When you sell your property in Japan, revenue stamp needs to be affixed to the sale and purchase contract. Like when you purchased the property, Registration and License Tax will be payable, but usually borne by the buyer. If you make profit by the sale, you will need to pay Capital Gains Tax. Its rate is determined by the length of ownership period. If you are a non-resident, you will need to submit final tax return to settle the tax amount via a tax agent you appoint.
For more detail, please read our article “Taxes and fees you need to pay when selling a property in Japan”. Click here.