When a non-resident foreigner owns Japanese property, a different tax applies at each of five stages: acquisition, holding, renting, selling and inheritance. The rates themselves are public, but unless you know "when, to whom and how much," you can over-pay through withholding and miss the refund, or face an unexpected inheritance burden. Let's get the basic structure straight.
1. Taxes at acquisition
| Real-estate acquisition tax | 3–4% of assessed value |
| Registration tax (ownership transfer) | 2% of assessed value |
| Registration tax (mortgage) | 0.4% of the loan |
| Stamp duty | ¥10,000–¥100,000 |
| Consumption tax (building only) | 10% |
Budget roughly 5–8% of the building price for acquisition costs. Watch the timing: registration tax and stamp duty are due at registration/contract, but the real-estate acquisition tax is billed later — the assessment notice arrives some months after purchase. If you spend everything at handover you can fall short, so set aside just under 10% of the price separately. Note too that land is consumption-tax-exempt; only the building is taxed at 10%.
2. Annual holding taxes
- Fixed-asset tax: 1.4% of assessed value
- City-planning tax: 0.3% of assessed value (within planning zones)
- Total: about 1.7% of assessed value (reductions apply to residential land)
Fixed-asset and city-planning taxes are levied on whoever owns the property on 1 January each year, payable in four instalments. The key is the residential-land reduction: for "small-scale residential land" up to 200 m², the fixed-asset tax base drops to one-sixth and the city-planning tax base to one-third. Vacant or commercial land gets no such relief, so the same plot is taxed very differently depending on whether a home stands on it. Non-residents normally pay through a tax agent (see below).
3. Tax on rental income
A non-resident's rental income is first subject to 20.42% withholding (usually deducted from rent by the management company). But this is only a provisional levy. File a tax return, deduct your expenses, and the over-paid portion is refunded. Deductible expenses include building depreciation, management fees, repairs, loan interest, fixed-asset tax and insurance. Stacked up, these shrink taxable income sharply, and it is not unusual for the effective rate to fall to around 5–15%. Don't treat the withholding as final — filing by 15 March every year is where the overseas owner gains the most.
4. Capital-gains tax on sale
| Holding period | Rate |
|---|---|
| 5 years or less (short-term) | 39.63% (income 30% + resident 9% + reconstruction 1.63%) |
| Over 5 years (long-term) | 20.315% |
| ¥30M residence exemption | residents only (not for non-residents) |
The short- vs long-term line, which nearly halves the rate, is judged by whether you have held for more than five years as of 1 January of the year you sell — exactly five years from the purchase date is not enough; it is drawn by calendar year. The tax is not on the sale price but on the gain: sale price minus (acquisition cost + selling costs). Keeping your original contract and cost receipts lets you book the acquisition cost correctly and lower the tax. When a non-resident sells, the buyer also withholds 10.21% of the price (residential sales under a threshold are exempt), settled later in the return.
5. Inheritance tax (the biggest pitfall)
Easily overlooked: Japanese property held by a non-resident is subject to Japanese inheritance tax regardless of where the deceased or heirs live. The basic deduction is "¥30M + ¥6M × number of statutory heirs," with a top rate of 55%. Unlike cash, property is hard to split and the tax must be paid in cash against the assessed value, so preparing the funds to pay becomes the real problem. Transferring shares by lifetime gifting, using an asset-management company, and securing payment funds through life insurance — planning while alive is decisive. Once someone has died, almost no moves remain.
6. Gift tax
Gifting moves assets without waiting for inheritance and, used well, greatly shrinks the burden. The classic is annual gifting (tax-free up to ¥1.1M a year), which compounds into a large sum over time. To move a lump sum, there is the settlement-at-inheritance system (tax-free up to ¥25M at the time of gift, reconciled at inheritance), and for residential property between spouses a spousal deduction of ¥20M. Which to choose depends on asset size, age and number of heirs, so the standard practice is to run a long-term simulation together with inheritance tax.
7. Avoiding double taxation via tax treaties
The worry of "being taxed in both Japan and home" is resolved by tax treaties. Japan has tax treaties with major countries (US, China, Korea, Australia and more), and tax paid in Japan can be deducted on your home return as a foreign tax credit. Because treaties differ in how they treat dividends, interest and property income and in their ceiling rates, checking your own country's treaty in advance lets you minimise the effective rate worldwide. Ideally, arrange for tax advisers in both countries to coordinate.
8. The tax agent
A non-resident who owns Japanese property is obliged to appoint a "tax agent" within Japan. This is the contact who receives tax notices, files returns and deals with the tax office on your behalf — usually a licensed tax accountant (a yearly contract of roughly ¥120,000–¥300,000) or a trusted Japan resident. Without one, notices never reach you and arrears can build up unnoticed. It is the first practical step, to be settled at the same time as the purchase.
"Leave the taxes entirely to the experts" loses you money. Understanding the basic structure and then building a long-term strategy with a tax accountant and lawyer is the right path for an overseas owner.