4F Nihonkoudoukai Building
3-1-6 Nishikanda, Chiyoda-ku,
Tokyo, Japan 101-0065
Telephone
03-6261-4097
Outside Japan & Global Division
+813-6261-4096
Domestic Sales Division
03-6261-4099
Fax
03-6261-4098
inquiry@mrl-tokyo.com
4F Nihonkoudoukai Building
3-1-6 Nishikanda, Chiyoda-ku,
Tokyo, Japan 101-0065
Telephone
03-6261-4097
Outside Japan & Global Division
+813-6261-4096
Domestic Sales Division
03-6261-4099
Fax
03-6261-4098
inquiry@mrl-tokyo.com
When buying a home, it’s natural to wonder how much tax you will need to pay. In particular, property tax is an annual tax levied on real estate ownership, so it’s reassuring to know in advance how much it will cost. In this article, we will explain what property tax is, how it is calculated, and when it is due, specifically for those planning to purchase real estate.
Property tax is levied on individuals who own fixed assets such as land, buildings, or depreciable assets. After purchasing real estate, taxes are imposed each year in January on both the land and the building.
Land subject to property tax includes not only residential land but also:
Additionally, wasteland and salt fields are also taxed as fixed assets.
Buildings subject to tax include not only residences but also:
Depreciable assets are assets that lose value over time, including:
For land and buildings, taxes are imposed by the municipality where they are located. Depreciable assets are taxed after the owner reports their assets to the municipal office where the assets are located. These fixed assets are registered in the Fixed Asset Tax Ledger, and taxes are levied on the registered owner as of January 1 each year.
When real estate is sold, the buyer becomes responsible for property tax on January 1 of the following year, and the tax for that year is levied on the buyer. Since January 1 is the reference date for taxation, the seller remains liable for property tax in the year the sale contract is concluded.
However, many sellers feel it is unfair to pay property tax after selling the property. Therefore, it is common to negotiate at the time of sale that “the buyer will bear property tax from the transfer date onward.” In practice, the property tax is prorated based on the transfer date, with the buyer paying the seller their portion in advance. The seller then pays the full tax to the municipality by the due date.
When purchasing real estate, the prorated property tax for the year of purchase is considered part of the transaction costs.
The formula for calculating property tax is:
Property Tax = Taxable Standard Value × 1.4%
The taxable standard value is the price registered in the Fixed Asset Tax Ledger as of January 1 and can be confirmed via the property tax notice. If you want to estimate it roughly:
The official land price is published every March by the Ministry of Land, Infrastructure, Transport and Tourism and can be checked via the “Standard Land / Reference Land Search System.” The 1.4% is the standard tax rate, although municipalities may set rates slightly higher or lower.
Land with a residence (residential land) may qualify for a property tax reduction. The taxable standard value is lowered, reducing the tax amount.
Small-scale residential land refers to the portion of residential land 200㎡ or less, and general residential land is the portion exceeding 200㎡.
Example:
If the taxable standard value of small-scale residential land is ¥30,000,000:
Without the special deduction, it would be ¥30,000,000 × 1.4% = ¥420,000. The reduction clearly lowers property tax significantly.
As mentioned, it is common for the buyer to pay the seller the prorated property tax for the year of sale.
Example:
Property tax is ¥300,000 and the property is transferred on August 1:
The buyer pays the seller ¥126,000 as the prorated property tax.
Average property tax ranges from ¥100,000 to ¥300,000, depending on location and building age.
Property tax notifications are sent to the owner as of January 1. Taxes must be paid by the deadlines listed on the notice.
Each notice includes payment slips for the four installments.
For 2022, the base rate was 1.4%. Delays significantly increase the tax owed, so timely payment is important. Some municipalities allow one-time full payment to simplify management.
Property tax can be paid at banks or convenience stores using the included slips. You can also set up direct debit or, in some municipalities, pay via credit card or e-money. If slips are lost, request a reissue from the municipal tax office (the tax notice itself cannot be reissued).
Property tax is an annual tax on land, buildings, and depreciable assets. The standard calculation is:
Taxable Value × Standard Tax Rate (1.4%)
The payment is usually divided into four installments, with the notice sent around April. Failure to pay by the deadlines results in penalties. Knowing how property tax is calculated and when it is due helps ensure smooth budgeting and compliance when purchasing real estate in Japan..
