Fees and taxes paid when purchasing a property in Japan are based on the country`s specific legal and regulatory requirements as well as the standardized processing charges paid to the real estate agent. Depending on the reason of your purchase and the type property that you take ownership of, additional fees, such as property management, may also be applicable afterwards.
These are the types of fees you can expect.
Any property that you purchase in Japan for less than ¥2 million will charge a 5% brokerage fee plus consumption tax. If the price of a property is between ¥2 million and ¥4 million then this will become 4% + plus consumption tax and with an addition ¥20,000 charge. Property purchased that is priced above ¥4 million will have a 3% brokerage fee, ¥60,000 fee and consumption tax.
If you are purchasing direct from a seller then you will have no need to pay a brokerage fee but you will be responsible for the completion of all legal paperwork. As part of its service, Housing Japan handles all necessary paperwork, the translation of everything required into English and is also able to assist on further aspects of a property purchase such as handling government taxes.
Acquisition taxes are dependent on the type of property that you purchase, differing from house, to land to a commercial building for example by 3 – 4% of the fixed asset value. For acquisition of property that has residential land use zoning, a tax relief deduction is applicable.
Residence Building (your primary address): 4.0%
Non-residence Building: 4.0%
The amount of stamp tax to be paid depends on the property price listed on the purchase agreement, but within the range of ¥10,000 to ¥480,000.
Consumption Tax (Sales Tax or VAT)
The consumption tax, sometimes called sales tax or VAT in other countries.
In Japan, after staying at 5% for a long period of time this has recently raised to 8.0% and as of April 1, 2017 it will rise again to 10%. Whole building purchase is expected to remain at 8% and there is no consumption tax for a land purchase.
Registration tax is calculated by the government against the taxable fixed asset value of the property you are purchasing, it is applied equally to any property, regardless of the zoning (eg commercial, residential etc). It is payable upon acquisition of either a piece of land or a whole-building.
Registration of land ownership: 2.0%
Registration of building ownership: 2.0%
Registration of a property loan / mortgage on the property: 0.4%
City Planning Tax
The taxable value of the city planning tax is calculated on the tax valuation of fixed assets (as set by the local municipality). On average it is 1.4% of the estimated fixed asset value. For land areas greater than 200 sqm, then one-third of the fixed asset value is taxable under the local tax. For an acquisition of a building constructed within the past year and greater in size than 50 sqm and less than 280 sqm, one-half of the estimated fixed asset value is deducted from the taxable amount.
Applicable taxes to Rental Returns
Housing Japan Property Management Division is able to help investors who purchase a Tokyo property with the intent to earn from its rental income. There is a 20% flat-rate non-resident withholding tax. When annual income tax is filed at the end of the financial year the property owner will receive a refund.
Capital Gain Tax
When you realise a capital gain on a Tokyo property asset, there is an applicable tax depending on the situation.
Short-term Capital Gain Tax (less than 5 years): 39% (income tax: 30%, residential tax: 9%).
Long-term Capital Gain Tax (more than 5 years): 20% (income tax: 15%, residential tax: 5%).
There is also the standard 10% withholding tax that is charged at the point of sale. This is fully credited after tax returns are filed at the end to the financial year.
Housing Japan is able to help in the understanding of the tax system in Japan and how to work your way around it for maximum benefit. Our in-house expertise can not only advise on these issues, but also translates and present severything in English, while also acting on your behalf with local Japanese city offices and authorities. Contact us if you have any questions.