From Stamp Duty to Property Tax: What to Expect When Purchasing Real Estate in Japan

When it comes to real estate transactions in Japan, a country renowned for its dynamic housing market and thriving cities, navigating the tax landscape can be both intriguing and complex.

What are the taxes associated with buying real estate in Japan?

When it comes to Japanese real estate transactions, it’s important to be aware of the taxes involved. These taxes can be categorized into two types: those payable during the purchase of the property and those that arise after the purchase is complete.

Upon acquiring the property, various taxes must be settled, such as stamp duties and transfer taxes. However, it doesn’t end there. Once you become the owner, there are annual taxes that you will be responsible for. Let’s explore together the specific types of taxes that you’ll encounter in this journey of property ownership.

Taxes to be paid at the time of purchase

 Purchase Acquisition Tax

This tax is imposed when real estate is purchased (exchanged, donated, etc.).

※ If the property is acquired by inheritance, it is exempt from taxation.

The tax is calculated by multiplying the property tax assessed value by 4%.

 Consumption Tax

Consumption tax is levied on real estate transactions conducted by taxable businesses as well as brokerage commissions paid to real estate companies and construction of buildings.

※ The sale of land and private sales of previously owned properties are exempt from consumption tax.

 Stamp Tax

This tax, commonly referred to as stamp duty, is levied upon the signing of a sales contract or a loan agreement, including mortgage loans. It is the responsibility of the individual or entity executing the document to bear the cost of the stamp duty. The specific amount of stamp duty is calculated based on the monetary value indicated in the contract, typically corresponding to the purchase price of the property.

 Title Registration Tax

This tax, known as the acquisition tax, is levied upon the purchase of real estate and its subsequent registration in the official property registry. When registering the property for preservation of ownership, the acquisition tax is calculated at a rate of 0.4% based on the assessed value of the fixed asset. It is important to note that this tax is incurred as part of the registration process to establish legal ownership of the property.

Taxes to be paid yearly

 Property Tax

Yearly property taxes are calculated based on the property value of fixes assets and paid to the municipality in which the property is located. 

The tax amount is calculated as follows: assessed value (tax base) x 1.4%.

 City Planning Tax

This tax is imposed on owners of real estate for the purpose of covering the cost of city planning projects. 

The tax amount is calculated by multiplying the tax base (assessed value of land and houses) by 0.3%

While taxes may seem like a daunting aspect of the real estate journey, understanding them is vital to avoid any unforeseen financial burdens. Our goal is to provide you with clear insights and practical tips that will empower you to navigate the tax landscape of real estate transactions in Japan confidently.

Note: It’s important to keep in mind that tax regulations can change over time, so it’s recommended to consult with a professional or seek updated information from official sources to ensure accuracy and compliance with the latest requirements. Also, the amount of tax varies greatly depending on the price of the property so it is recommended that you confirm the amount in advance by consulting a reliable tax professional.