How Much Is Property Tax When Buying Real Estate In Japan?
Japan is recognized as a developed country and ranked the third largest economy in the world. To invest in Japan’s real estate may be a wise decision for investors and home owners if they know all the costs involved. This article provides the complete details about Japan's Real Estate tax costs to potential buyers. The following is a breakdown of all the costs involved up to the final acquisition of the property as well as the yearly taxes involved in owning real estate in Japan.
- Broker Fee
- Consumption Tax
- Stamp tax
- Fixed Asset Tax
- City Planning Tax
- Real Estate Acquisition Tax
- Registration Tax
- Japanese Income Tax and Withholding Tax
source: Japan Federation of Public Tax Accountants Association
If the foreigners are interested in buying real estate from the individual owner, they are required to do it through a licensed real estate agent. Therefore, it is essential to you as a buyer to know about the brokerage fee rates. Japan, real estate department, has categorized brokerage fee into three different types based on the investment amount which is given below:
Note: X = Real Estate Cost
If the buyer is interested in buying the property less than ¥2 Million Japanese Yen, brokerage fee will be a rate of 5% of the purchase price.
X ≤ 2 Million Yen @ 5%
If the price is more than ¥2 Million Yen and less than ¥4 Million Japanese Yen, brokerage fee will charge a rate of 4 % of the purchase price plus ¥20,000 yen.
2 Million ≥ X ≤ 4 Million Yen @ 4% + ¥ 20,000
If the real estate cost is exceeding ¥4 Million Japanese yen, the brokerage fee will charge a rate of 3% of the purchase price.
X ≥4 Million Yen @ 3% + ¥ 60,000
Consumption Tax is payable on the purchase of real estate in Japan. Consumption Tax is also known as Sales Tax or Value Added Tax (VAT). Currently, In Japan, the current rate of Consumption Tax is 8% however this is scheduled to increase to 10% in October 2019., The buyer pays the consumption tax on the purchase price no matter which type of property they buy.
When an investor is agreed to buy a real estate in the Japan, agent prepared the contracts and receipts documents. According to Japan’s laws, revenue stamps are required. The investor should buy and paste on the final contracts documents to make it legal. Japan, real estate department, is provided the given below schedule of Stamp Tax:
[Sales contract of real estate Japan]
Stamp tax amount*
Less than 10,000 yen
Over 0.1 million yen and not more than 0.5 million yen
Over 0.5 million yen and not more than 1 million yen
Over 1 million yen and not more than 5 million yen
Over 5 million yen and not more than 10 million yen
Over 10 million yen and not more than 50 million yen
Over 50 million yen and not more than 100 million yen
Over 100 million yen and not more than 500 million yen
Over 500 million yen and not more than 1 billion yen
Over 1 billion yen and not more than 5 billion yen
Over 5 billion yen
Amount not stated
Fixed Asset Tax
When you own real estate in Japan whether for investment or residential purpose, Fixed Asset Tax and City Planning Tax are imposed annually. This tax is calculated based on the value of the asset like building, land, and depreciable assets. The value of fixed assets tax is 1.4% calculated on the current market value of the real estate.
Assessed Value x 1.4%
City Planning Tax
City Planning Tax is to some extent similar to the Fixed Assets Tax levied on real estate in Japan with a rate of 0.3 % annually. It is calculated in a similar way as Fixed Assets Tax, based on the value of real estate. It will be submitted to the local Tax Authorities on a yearly basis.
Assessed Value x 0.3%
Assessed Value x 0.3%
Real Estate Acquisition Tax
Real Estate Acquisition Tax is imposed once at the time of acquisition of land and building. It is payable by the purchaser or owner each time when the real estate is transferred to a new owner. Real Estate Acquisition in Japan is charged at 4% of the value mentioned in the fixed asset's book.
If you are not a Japanese resident (living abroad), own real estate in Japan, and receive income from rent you will be subject to withholding tax under Japan’s Tax laws. The rental income from non-residents in Japan is charged at the rate of 20.42%. The Japan Tax Authority divided the tenants of the non-resident house into following two categories:
1. Corporate as the Tenant
2. Individual as the Tenant
Corporate as the tenant
If a company rents an office/ house from the Japanese non-resident for official use or residence purpose for their employees, it is the sole responsibility of a tenant to deduct the withholding tax (20.42%) from monthly rent and submit it to the office in charge. The government transferred the responsibility towards the tenants because the corporation has proper accounting and finance department, and it is easy to calculate and manage on a monthly basis.
Individual as the tenant
If tenants are individuals, in that case the house owner is responsible to submit the withholding tax to department in charge. If you’re a Japanese non-resident or not living permanently in Japan, in that case appoint someone such as a tax accountant or property manager to remit the property withholding amount to the tax authorities.
Hopefully you have now gained some understanding of the taxes related to buying and owning a property in Japan.
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