There are a number of taxes involved with the purchase of property for foreign buyers in Japan, according to the Jones Lang LaSalle Japan Property Investment Guide 2015. It is also worth noting that there is a treaty for the avoidance of double taxation between Japan and Australia.

Taxes on possession and operation of real estate

Fixed Asset Tax

This is levied on land, buildings, and tangible business assets. Both residents and non-residents who are registered as the owners of a fixed asset in the tax register book as of January 1 of each year, are obliged to pay the fixed asset tax.

The amount of this tax is based on the applicable tax rate (usually 1.4 per cent) and the assessed value of the fixed asset.

City Planning Tax

This is a surtax on the fixed asset tax, and is usually levied at a rate of 0.3 per cent on land and buildings within city planning zones.

Taxes on acquisition and transfer of real estate

Stamp Tax

This is levied on certain documents such as contracts, bills, and share certificates. This tax is levied by affixing revenue stamps (as pictured) in the amount equal to the applicable stamp tax. Tax rates vary from JPY 200 (USD 2) to JPY 600,000 (USD 6,152).

Registration and Licence Tax

This tax is levied on the registration with respect to real estate, companies, and so on. The tax rate depends on factors such as the type of the transaction and the value of the real estate.

Real Property Acquisition Tax

This tax is levied on the acquisition of land or buildings at the rate of 3 per cent (for land and residential buildings) or 4 per cent (for non-residential buildings).

Capital Gains Tax

For individuals, capital gains from the transfer of land and buildings are subject to capital gains tax (consisting of a national [income] tax component and a local [residential] tax component). The capital gains tax rates are shown below, and the tax is calculated separately from income tax on other income.

Holding period of land:

Five years or less – Income tax is 30 per cent and Residential tax is 9 per cent

Over five years – Income tax is 15 per cent and Residential tax: 5 per cent

Value Added Tax/Goods and Services Tax

The sale or lease of land and lease of residential buildings is deemed non-taxable.

Tax depreciation

Depreciation for a building can be deducted as a necessary expense from the amount of income from real estate for Japanese tax purposes. The cost of land cannot be depreciated.

Personal taxation

Personal tax rates also apply to foreigners, depending on whether they are classed as residents or non-residents.

Source: Jones Lang LaSalle Japan Property Investment Guide 2015.

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Read also:

• Obtaining finance in Japan
• Buying property in Japan
• Renting property in Japan
• Japan real estate glossary