Tax When You Sell or Pass On Japanese Property: A Guide for Non-Resident & Foreign Owners

How much tax to sell or pass on Japanese property? A gain on sale is taxed (capital-gains tax: ~20.315% long-term over 5 years, ~39.63% short-term); passing it to children or family triggers inheritance / gift tax. Property located in Japan is taxed in Japan even if the owner or heirs live abroad.

1. Selling — capital-gains tax

If a sale produces a gain (sale price − acquisition cost − selling costs), it is taxed at a rate that depends on how long you held it.

※Resident tax applies only to those domiciled in Japan on Jan 1, so a non-resident pays no resident-tax portion — roughly 15.315% (long-term) / 30.63% (short-term) as a guide. Whether special deductions (e.g. for a former home) apply varies by situation; confirm the final position with a tax accountant and the National Tax Agency.

2. The 10.21% withholding when a non-resident sells

When the seller is a non-resident, the buyer generally withholds 10.21% of the sale price and remits it, paying the rest to the seller. It is essentially a prepayment that the seller squares up later via a tax return. Exception: no withholding is required if the buyer is an individual acquiring the property as a home for themselves or a relative and the price is ¥100 million or less.

3. Tax while you hold it

While you own it, fixed-asset tax and city-planning tax fall on the owner as of Jan 1 each year. For the depreciation angle see building depreciation and tax; for purchase-time taxes see tax for foreign buyers.

4. Passing it to children / family — inheritance & gift tax

Real estate located in Japan is subject to Japanese inheritance tax even when the owner or heirs live abroad (tax on Japan-situs assets). Inheritance tax has a basic deduction; only the amount above it is taxed.

• Inheritance basic deduction = ¥30 million + ¥6 million × number of statutory heirs.
• Lifetime gifts attract gift tax. The annual system gives a ¥1.1 million yearly exclusion; for larger transfers the "settlement-at-inheritance" election is an option.

Valuation (land by roadside-land value etc., buildings by their fixed-asset value as a guide) and the deductions/special rules are technical. We recommend consulting a tax accountant, including on procedures and documents where an heir lives overseas.

5. What overseas owners should arrange

• Appoint & register a tax agent — a non-resident designates a nōzei-kanrinin to handle tax matters and registers them with the tax office.
• File the year after a sale — capital gains are settled by a tax return the year after sale (the withholding is reconciled here too).
• Keep acquisition-cost evidence — if acquisition cost is unknown, a deemed 5% of the sale price applies, raising the tax. Keep the purchase contract and build-cost records.
• Specialists — work with a tax accountant (tax) and judicial scrivener (registration), and build without flying in via remote construction management.
• Remittance — for transferring/receiving sale proceeds see overseas-owner support.

Towa's role, and common myths

Tax is a specialist's domain. As a builder, we help create the records that pay off at sale or inheritance — build-cost evidence that supports acquisition cost, and safekeeping of drawings and specifications. Confirm the tax itself with a tax accountant and the National Tax Agency.

Japanese property is not a "tax-free because I'm abroad" asset. Planning for the exit (sale) and the handover (inheritance) — starting with acquisition-cost records at the build stage — genuinely pays off. This article is general information and rates/rules change; always confirm your specific tax and procedures with a tax accountant / CPA and the National Tax Agency. Planning and rough costing of a building are free to discuss.