Tax/ Economics | 税金・経済

About Japanese Real Estate

Boasting one of the largest populations and the third-biggest GDP in the world, after many years of economic stasis Japan is now poised to shrug off its deflationary mantle and reposition itself as a stable, risk-free destination for real estate investment in Asia. With mid to long-term investments performing well and renewed interest in the economy from foreign investors, a shortage of incoming supply and high residential occupancy rates provide numerous benefits to investors seeking stable yields. In addition to having the world’s largest metropolitan area GDP, Tokyo’s population continues to grow exponentially, providing real estate investors with a vast pool of potential tenants in one of the world’s most recognisable and iconic cities.

Taxes

Acquisition & Registration

Holding Period

Fixed Asset Tax

City Planning tax

Resident tax

This type of property tax is 1.4% of the estimated fixed asset value on average, though the upper limit of the tax rate is 2.1% as enacted by respective municipalities.

Fixed Asset Value:

One-sixth of the fixed asset value is taxable for land areas less than 200 sqm.

One-third of the fixed asset value is taxable for land areas greater than 200 sqm.

One-half of the value of the estimated fixed asset value is deducted from the taxable amount for a period of 5 years following acquisition of a building constructed within the past year and greater than 50 sqm, but less than 280 sqm in area.

The upper limit of the tax rate is 0.3% as enacted by the respective municipalities.

The standard taxable value of the city planning tax is calculated based on the tax valuation of fixed assets.

Residential property less than 200 sqm: One-third of the standard taxable value. Residential property greater than 200 sqm: Two-thirds of the standard taxable value.

paid by tenant

Rental Income

Non-Resident

Income tax

Income tax bands

20% flat-rate withholding tax

When the annual income tax is filed by March the following year the owner will receive a refund.

Income Per Annum

Less than JPY 380,000 =

JPY 380,001 - JPY 1,950,000 =

JPY 1,950,001 - JPY 3,300,000 =

JPY 3,300,001 - JPY 6,950,000 =

JPY 6,950,001 - JPY 9,000,000 =

JPY 9,000,001 - JPY 18,000,000 =

Greater than JPY 18,000,000 =

Amount of Tax Payable

0% (non-taxable income)

5.0%

10.0%

20.0%

23.0%

33.0%

40.0%

Deduction

JPY 97,500

JPY 232,500

JPY 962,500

JPY 1,434,000

JPY 4,404,000

Disposal

Capital Gains tax

Withholding tax

When a capital gain is generated on the disposal of a fixed asset, the following capital gains tax is applied.

a) Short-term capital gains (less than 5 years): 39% (income tax: 30%, resident’s tax 9%).

b) Long-term capital gains (equal to or greater than 5 years): 20% (income tax: 15%, resident’s tax: 5%).

* The holding period is calculated from 1 January.

10% of sales price (fully credited after tax returns filed)

Surtax

Surtax

A 2.1% surtax will be levied on the withholding tax and income tax for certain Japan-source income arising from 1 January, 2013. Residents of countries with tax treaties in effect with Japan may be able to receive a partial or full refund on this surtax.