Taxes You Must Pay When Buying Property in Japan

Real Estate Acquisition Tax (不動産取得税)

What It Is

Real Estate Acquisition Tax is a one-time prefectural tax charged when you acquire land or a building, whether through purchase, gift, or new construction.

One thing that catches buyers off guard: you don't pay this at closing. The tax notice is sent by your prefectural government and usually arrives 3–6 months after the transaction. If you're living abroad, make sure someone can receive a post on your behalf in Japan.

Important: property acquired through inheritance is exempt from this tax.

Typical Rates

The tax is calculated on the government-assessed value (固定資産税評価額) not your actual purchase price. The assessed value is typically lower than the market price.

Current rates (subject to temporary reduction measures):

• Residential land and buildings: 3%

• Non-residential buildings: 4%

The 3% reduced rate for residential properties is a temporary government measure. Confirm the current applicable rate and any available deductions with your local prefectural tax office or a qualified tax accountant at the time of purchase.

When It Must Be Paid

You will receive a tax notice from your prefectural government. Payment is made as a lump sum, typically within 30–60 days of receiving the notice.

Source: National Tax Agency — National Taxes: When You Purchase/Sell Real Estate Located in Japan (NTA Sapporo, Nov 2024)

Registration and License Tax (登録免許税)

Property Registration Costs

When property ownership changes hands in Japan, it must be officially registered with the Legal Affairs Bureau (法務局). This registration triggers the Registration and License Tax.

The tax is based on the government-assessed value of the property. Rates vary by transaction type such as ownership transfers, preservation registrations for new builds, and inheritance registrations are each treated differently. Reduced rates apply for certain qualifying residential properties within specified periods. Confirm current rates with the Legal Affairs Bureau or your judicial scrivener at the time of purchase, as reduced-rate deadlines are updated regularly.

The registration process is handled by a judicial scrivener (司法書士), whose service fees you pay separately.

Mortgage Registration Tax

If you are financing your purchase with a mortgage, the bank's lien on the property must also be registered. A separate registration tax applies to this mortgage registration, calculated on the loan amount. Reduced rates may apply for qualifying residential mortgages.

Source: National Tax Agency — Registration and License Tax · Ministry of Justice — Legal Affairs Bureau

Stamp Duty (印紙税)

Contract Tax System

When you sign a real estate purchase contract in Japan, a revenue stamp (収入印紙) must be physically affixed to the document. This is Japan's stamp duty, and it applies to both the buyer and the seller. In practice, the cost is typically split evenly between the two parties.

How Stamp Duty Is Calculated

The amount is determined by the value stated in the contract. Japan periodically introduces reduced rates for real estate contracts confirming the current applicable amount with the NTA or your real estate agent at the time of signing, as the reduced-rate period has a defined deadline.

For most standard residential purchases, stamp duty is a relatively minor cost compared to other taxes in the transaction.

Source: National Tax Agency — Stamp Duty

Consumption Tax (消費税)

When Consumption Tax Applies

Japan's consumption tax is currently 10%, but it does not apply to all property transactions.

Land vs. Building Taxation

Land is always exempt from consumption tax. Only the building portion of a transaction may be subject to the 10% charge.

New Property vs. Resale Property

Whether consumption tax applies depends on who the seller is:

• Buying a new property from a developer (a business entity) → 10% consumption tax applies to the building portion

• Buying a resale property from a private individual → no consumption tax

• Buying commercial property from a business → 10% consumption tax applies to the building portion

Note that consumption tax also applies to professional service fees such as your real estate agent's commission and judicial scrivener fees.

Source: National Tax Agency — Consumption Tax

Taxes When Owning Property in Japan

Fixed Asset Tax (固定資産税)

Japan's Main Annual Property Tax

Fixed Asset Tax is the primary annual property tax in Japan. It applies to land, houses, condominiums, and commercial buildings. The tax is assessed on whoever owns the property as of January 1st each year.

Standard Tax Rate

The standard rate is 1.4% of the government-assessed value annually. Note that the assessed value used here is not the price you paid. It is the value determined by your local government authority, which is typically lower than the market price.

Assessed Value System

The assessed value is reviewed every three years by local authorities. Tax notices are sent annually, typically between April and June. Payment can be made in a lump sum or in quarterly installments.

A note for non-residents: tax notices are mailed to the registered address in Japan. If you live abroad, you are legally required to appoint a Tax Agent (納税管理人), a Japan-resident individual such as a relative or tax accountant, to receive notices and manage payments on your behalf.

Source: National Tax Agency — Fixed Asset Tax

City Planning Tax (都市計画税)

Additional Municipal Tax

City Planning Tax is a second annual tax charged on top of Fixed Asset Tax. It applies within designated urban planning zones, covering most cities and major residential areas across Japan.

Areas Where It Applies

This tax is common in Tokyo, Osaka, Nagoya, and their surrounding urban and suburban districts. Properties in rural or non-designated areas may not be subject to it.

The rate is capped at 0.3% of the assessed value, though some municipalities charge slightly less. Combined with Fixed Asset Tax, annual holding costs typically come to around 1.7% of assessed value in most urban areas.

Source: National Tax Agency — Fixed Asset Tax and City Planning Tax

Taxes When Selling Property in Japan

Capital Gains Tax (譲渡所得税)

Tax on Profit From Selling Property

According to the NTA, when you sell real estate located in Japan at a profit, that gain is subject to income tax and special income tax for reconstruction. This applies to both residents and non-residents.

The taxable gain is not the full sale price. It is calculated as:

• Sale price − (acquisition cost + selling expenses)

Acquisition costs include your original purchase price, brokerage fees paid at purchase, registration expenses, stamp duty, and real estate acquisition tax. Keep every receipt from the day you buy.

Short-Term vs. Long-Term Ownership

Japan draws a clear line between short-term and long-term ownership. The distinction is based on how long you held the property as of January 1st of the year you sell, not the literal date of purchase or sale.

According to the NTA:

• Property held for 5 years or less as of January 1 of the sale year = short-term transfer, taxed at approximately 39.63% (30.63% national tax + 9% local inhabitant's tax)

• Property held for more than 5 years as of January 1 of the sale year = long-term transfer, taxed at approximately 20.315% (15.315% national tax + 5% local inhabitant's tax)

The 5-year threshold matters enormously. The difference between the two rates can mean millions of yen on a single sale.

Source: National Tax Agency — National Taxes: When You Purchase/Sell Real Estate Located in Japan · NTA No.12006 — Tax on the income of an individual as a non-resident in Japan

Tax Rates for Foreign Property Owners

According to the NTA, both residents and non-residents are required to file income tax returns in Japan when they earn income from the transfer of real estate located in Japan. The same capital gains tax rates apply regardless of nationality.

However, non-resident sellers face an additional step. When a non-resident or foreign corporation sells Japanese property, the buyer who makes payment in Japan is generally required to withhold Japanese tax at the time of payment and remit it to the tax office. The seller receives the remaining amount after withholding.

The withheld amount is treated as a tax credit. The non-resident seller must still file a tax return in Japan by the deadline (March 15th of the following year for individuals) to settle the final tax liability. Any excess withheld is refunded through this process.

Source: NTA — National Taxes: When You Purchase/Sell Real Estate Located in Japan · NTA No.12006

How Long-Term Ownership Can Reduce Taxes

Holding for more than five years cuts the capital gains tax rate from approximately 39.63% to approximately 20.315%, nearly in half. For investment-oriented buyers, this is one of the most significant tax planning decisions you can make before signing a purchase contract.

Additionally, if the property was your primary residence, a special deduction of up to ¥30 million may apply to the capital gain. If your total gain is less than ¥30 million, you may owe no capital gains tax at all. Eligibility conditions apply confirming with a qualified Japanese tax accountant.

Source: National Tax Agency — Transfer of Residence

Expenses That May Reduce Taxable Gains

Several costs can be deducted from your sale proceeds when calculating the taxable gain. These typically include:

• Original purchase price of land and building

• Registration taxes paid at purchase

• Stamp duty on the purchase contract

• Real estate agent commission at purchase

• Judicial scrivener fees

• Capital improvement and renovation costs

• Real estate agent commission at sale

• Stamp duty on the sale contract

Maintaining thorough records from the day you purchase is essential. Japanese tax authorities require documentation, and receipts from years prior can be difficult to reconstruct.

Source: National Tax Agency — National Taxes: When You Purchase/Sell Real Estate Located in Japan

Other Japanese Property Taxes to Be Aware Of

Inheritance and Estate Tax

Japan's High Inheritance Tax Reputation

Japan's inheritance tax applies when property or assets are received through inheritance. Real estate located in Japan is a Japan-situs asset and falls within the scope of Japanese inheritance tax.

The basic exemption is calculated as ¥30 million plus ¥6 million multiplied by the number of statutory heirs. Estates below this threshold have no filing requirement. Above it, progressive rates apply and up to a maximum of 55% on the largest portions of very large estates.

Cross-Border Estate Planning Concerns

For foreign nationals, whether Japanese inheritance tax applies to assets held outside Japan depends on factors including residency status, visa type, and the length of time spent in Japan. Directly held Japanese real estate, however, is consistently treated as a Japan-situs asset subject to Japanese inheritance tax regardless of the owner's residency.

Japan has inheritance and estate tax treaties with some countries, including the United States, which can help avoid double taxation. Check the treaty applicable to your country.

Professional legal and tax advice is strongly recommended before making any decisions about high-value estate matters.

Source: National Tax Agency — Inheritance Tax · PWC Worldwide Tax Summaries — Japan Individual Other Taxes

Gift Tax on Real Estate Transfers

Transferring property to another person as a gift triggers Japan's gift tax, assessed on the recipient. An annual exemption of ¥1.1 million per recipient applies — transfers up to this amount each year are tax-free. Amounts above the exemption are taxed at progressive rates, which can reach up to 50% depending on the amount and the relationship between the parties.

For large real estate transfers, the annual exemption is far below the asset value, so gift tax can be substantial. Always seek professional advice before transferring property as a gift.

Source: National Tax Agency — Gift Tax

Withholding Tax for Non-Residents

According to the NTA, when a buyer in Japan acquires real estate from a non-resident or foreign corporation and makes payment in Japan, the buyer is generally subject to Japanese withholding tax at the time of payment. The withholding amount is remitted directly to the tax office.

The non-resident seller must then file a Japanese tax return by March 15th of the following year to declare the capital gain and settle the final tax amount. The withheld tax is applied as a credit, and any excess is refunded.

By law, non-residents who file tax returns in Japan are required to appoint a Tax Agent, a Japan-resident person such as a relative or licensed tax accountant, to administer their tax affairs. A Notification of Tax Agent must be submitted to the appropriate tax office.

Source: NTA — National Taxes: When You Purchase/Sell Real Estate Located in Japan · NTA No.12006

Income Tax on Rental Income

Rental Income Reporting

According to the NTA, income from renting out real estate located in Japan is treated as income from a domestic source. This applies to non-residents as well as residents.

If a non-resident rents out a property in Japan, the tenant or property management company must withhold tax at 20.42%of the rent and remit it to the tax office. An exception applies when the rent is paid by an individual who rents the property for their own or their relatives' personal residential use.

Non-residents earning rental income are required to file a final tax return between February 16th and March 15th of the following year. The withheld tax is settled through this return process.

Non-residents must also appoint a Tax Agent and submit a declaration to the relevant tax office.

Deductible Expenses

When filing a tax return for rental income, certain necessary expenses may be deducted. These commonly include property management fees, repairs and maintenance, fixed asset tax and city planning tax, building depreciation, property insurance, and accounting fees. Confirm which expenses qualify with your tax accountant.

Source: NTA No.12014 — Real Estate Income of Non-Residents

Example of Initial Purchase Costs in Japan

The following example illustrates the typical taxes and costs involved in purchasing a residential property worth ¥50 million for personal use in Japan. All figures below are estimates only. Actual amounts vary depending on the property type, assessed value, location, eligibility for tax reductions, and whether the seller is an individual or a business.

Estimated Taxes and Fees for a ¥50 Million Property

Taxes at the Time of Purchase

• Stamp Duty is paid when signing the purchase contract. The amount is based on the contract value and follows a tiered scale. Reduced rates currently apply for real estate contracts, which confirm the applicable amount with the NTA or your agent at the time of signing.

• Registration and License Tax is paid when ownership is registered at the Legal Affairs Bureau. The rate depends on the type of registration (ownership transfer, preservation for new build, or mortgage registration) and the assessed value of the property. Reduced rates apply for qualifying residential properties within defined periods and verify current rates at the time of purchase.

• Real Estate Acquisition Tax is paid after purchase upon receiving a notice from the prefectural government, typically 3–6 months after closing. The rate is generally 3% of the assessed value for residential properties under the current temporary reduction. The assessed value is typically lower than the purchase price.

• Consumption Tax applies to the building portion only if the seller is a business (e.g., a developer). If you are purchasing a resale property from a private individual, this tax does not apply. The rate is 10%.

• Judicial Scrivener Fees are a service fee, not a tax, but they are a required cost for handling the registration process. Budget approximately ¥100,000–¥200,000.

• Real Estate Agent Commission is regulated in Japan at a maximum of 3% of the purchase price plus ¥60,000, with consumption tax added on top.

Taxes After Purchase

• Fixed Asset Tax is charged annually at 1.4% of the assessed value. For a ¥50M property with an assessed value of approximately ¥35M, this is roughly ¥490,000 per year before any applicable reductions.

• City Planning Tax is charged additionally at up to 0.3% of the assessed value in urban areas, roughly ¥105,000 per year on the same example.

• Combined, annual holding taxes are typically around 1.7% of the assessed value. Reductions may apply depending on land size, building age, and property type.

Source: NTA — National Taxes: When You Purchase/Sell Real Estate Located in Japan · NTA — Fixed Asset Tax · NTA — Consumption Tax 

Tips for Foreigners Buying Property in Japan

Understand Total Ownership Costs Before Buying

The purchase price is only part of the picture. Factor in one-time acquisition costs, annual taxes, maintenance fees, repair reserve funds (for condominiums), insurance, and management fees if you are not based in Japan. Build the full cost picture before committing.

Work With a Japanese Tax Accountant

Japan's tax system is detailed, deadline-driven, and largely in Japanese. The NTA requires non-residents to appoint a Tax Agent who resides in Japan to handle filings and receive notices on your behalf. Beyond legal compliance, a bilingual tax accountant (税理士) will help you avoid costly mistakes, claim available reductions, and handle annual obligations.

Consider Ownership Structure Carefully

How you hold the property in your personal name, through a Japanese company, or via another structure, which affects your income tax, capital gains tax, and inheritance tax exposure. Each approach has trade-offs. Get professional advice on this before signing, because restructuring afterwards is expensive and complicated.

Review International Tax Treaties

Japan has tax treaties with many countries to help avoid double taxation. According to the NTA, if you are a non-resident, the treaty between Japan and your country of residence may affect how your rental income, capital gains, and inheritance are taxed in both countries. Provisions differ between treaties, so review the one relevant to your nationality.

Source: NTA No.12006 — Tax on the Income of an Individual as a Non-Resident in Japan

Plan for Your Long-Term Exit Strategy

The capital gains tax rate nearly doubles for properties sold within five years compared to those held longer. Think about your exit before you buy. If you are approaching the five-year mark, be aware that the holding period is measured as of January 1st of the year you sell timing your sale to fall in the right calendar year can make a significant financial difference.

FAQ

Q1: Can foreigners own property in Japan? 

Yes. Japan places very few restrictions on foreign ownership of real estate. Foreigners can own both land and buildings with full ownership rights.

Q2: Do foreigners pay higher property taxes than Japanese nationals? 

No. The NTA applies the same tax rules and rates to all property owners regardless of nationality.

Q3: How much is annual property tax in Japan? 

Fixed Asset Tax is 1.4% of the assessed value annually. City Planning Tax adds up to 0.3% in urban areas. Combined, most urban property owners pay around 1.7% of assessed value per year.

Q4: Is property tax based on the market price I paid? 

No. Annual property taxes are based on the government-assessed value, which is determined by local authorities and is typically lower than the actual market price.

Q5: What is the capital gains tax rate when selling? 

Approximately 20.315% for properties held more than five years, and approximately 39.63% for five years or less measured as of January 1st of the year of sale, not the literal calendar dates.

Q6: Do I need to file a tax return in Japan if I earn rental income from my property?

Yes. According to the NTA, non-residents earning rental income from Japanese property are required to file a final tax return in Japan and must appoint a Japan-resident Tax Agent to handle this on their behalf.

Q7: Does buying property in Japan give me a visa or residency? 

No. Purchasing real estate in Japan does not grant any visa, residency right, or path to permanent residency.

Q8: What happens to my Japanese property when I die? 

Directly held real estate in Japan is treated as a Japan-situs asset subject to Japanese inheritance tax. The basic exemption is ¥30 million plus ¥6 million per statutory heir. Rates are progressive and can be high for large estates. Cross-border estate planning involving a professional is strongly recommended.