Tax in Japan

Tax Summary 2017

 

If you own real estate in Japan then you must pay Japanese Taxes. However, Japan has Tax Treaties with 65 countries worldwide so that you will not be double taxed. Below is a summary of all the taxes related to purchasing, owning, and selling a property in Japan. In addition, there are links to references and detailed explanations of certain taxes at the bottom.

 

「Purchase」

Stamp Duty

Contract Price: 10 Million ~ under 50 Million:                 10,000 JPY

Contract Price: 50 Million ~ under 100 Million:               30,000 JPY

Contract Price: 100 Million ~ under 500 Million:             60,000 JPY

Contract Price: 500 Million ~ under 1Billion:                 160,000 JPY

*Relief Period until March 31, 2018       

                                     

Consumption Tax

 8% of the Building Price

 

Registration Tax                

2% of Assessed Residential Property Value

*0.4% for brand new property

  +

2% of Assessed Land Value

 

Acquisition Tax                

3% of Assessed Residential Property Value

*4% for Commercial Buildings

  +

1/2 of Assessed Land Value X 3%

*Relief Period until March 31, 2018

*Charged to Owner 3 to 6months after purchase

 

                                     

「Owner Switch Over」                                           

Property Tax

Assessed Property Value  X  1.4%

  +

City Planning Tax

Assessed Property Value  X  0.3%    

 

                                 

「Rent/Tenanting」                                           

Income Tax

Taxable Profit  X   5% ~ 45%

 

Income Tax if Corporate 

Taxable Profit  X  15% ~ 26.62%

 

 

「Re-Sell」                                                                      

Capital Gain Tax

Re-sell within 5 years from purchase: 30% of Capital Appreciation

Re-sell after 5 years from purchase: 15% of Capital Appreciation

  +

Residential Tax

9% +if a Japan Resident

 

Withholding Tax      

10% of Sales Price (will be fully refunded after filing taxes)

 

 

 [Progressive Income Tax Rates for Individual or Corporate]

 

「Individual Income Tax Rate」

Rates                       Income (in Millions)         Basic Balancing Deduction

5%                                    ~ 1.95 JPY                                     0 JPY

10%                                        1.95 JPY ~ 3.30 JPY                            97,500 JPY

20%                                       3.30 JPY ~ 6.95 JPY                          427,500 JPY

23%                                       6.95 JPY ~ 9.00 JPY                          636,000 JPY

33%                                           9 JPY ~ 18.0 JPY                         1,536,000 JPY 

40%                                          18 JPY ~ 40.0 JPY                        2,796,000 JPY

45%                                         40 JPY ~                                      4,796,000 JPY

                                     

 

「Corporate Income Tax」

* Fixed Tax Rate  

Rates                         Financial Year Beginning                                     

26.62%                           Before March 31, 2014

24.95%                           Beginning on or After April 1, 2015

24.43%                           Beginning on or After April 1, 2016

25.81%                           Beginning on or After April 1, 2017          

                                     

                                     

「SME Income Tax Rates」 

* SME = Company Capital of less than JPY 100 Mil  

 Rates             Income (in Millions)                     Financial Year Beginning

Above Rates                                8 JPY ~                                                   Throughout

15%                                          4 JPY ~ 8 JPY                                             Before April 1, 2018

19%                                             4 JPY ~ 8 JPY                                                     After April 1, 2018

 

* Income tax from the past year must be filed by Mid-March each year.

* Tax accountant fees will be separate.


 

Detailed Explanations of Taxes

 

Stamp Duty/ Tax:

The amount of stamp tax payable is dependent on the property price listed on the Purchase & Sales Agreement.

 

Consumption Tax:

Consumption tax will be applied to only the building and not the land. Usually this is already included into the Purchase Price. *When buying a second hand property, if the seller is an individual owner then it will be consumption tax free.

 

Registration Tax:

Registration tax is payable upon acquisition of either a piece of land or a building. The tax is calculated against the taxable fixed asset value, which is valued by the Japanese government once every 3 years.

 

Acquisition Tax:

This is only a 1 time payment per purchase and will be charged to the new owner 3 ~ 6 months after the property has been registered.

 

Property and City Planning Tax:

The Property Tax and City Planning Tax is calculated from the property and lands assessed value. The tax bill will be combined and sent to the owner (or tax representative) each year around June.

 

Income Tax:

Income tax rate is a progressive rate based on your NET annual income. For Corporates it will be a fixed rate no matter the income amount. Many costs that deal with managing your property may be deducted from your gross annual income so please talk to a tax accountant to understand what costs can be applied.

 

Capital Gain Tax:

Capital Gain Tax will be calculated from the NET Capital Appreciation of your property. Costs needed to sell your property may also be applied to your Capital Appreciation but do talk to a tax accountant to understand what costs can be applied.

 

Withholding Tax:

Withholding Tax will be applied when you sell your property. However, that amount will be refunding to you after you have filed your Income Taxes. In addition, as a foreign owner overseas, should your property tenant be a corporate tenant, Withholding Tax of 20.42% will be applied to your monthly rental income each month. This will also be refunded to the owner after Income Tax has been filed.

 

References:

National Tax Agency

Ministry of Land, Infrastructure, Transport and Tourism