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An Overview of Real Estate Related Taxes in Japan

Posted by Solid Real Estate on September 12, 2016
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When purchasing real estate in Japan, there are a variety of taxes you should be aware of. Some taxes are only paid once when purchasing property, and then there are taxes such as fixed asset tax and city planning tax which are charged annually. There are also some tax relief measures that may apply in certain circumstances. Below is a general overview of typical taxes that apply to real estate.

 

<Taxes charged at time of purchase only>

Stamp Duty, Registration Tax, and Real Estate Acquisition Tax are required at the time of purchase.

 

Stamp Duty 印紙税

The amount of stamp duty applicable varies according to the purchase amount. Revenue Stamps must be affixed to the Purchase Contract and the Loan Agreement. (Please check the latest information and stamp duty rates from the National Tax Agency HP.)

https://www.nta.go.jp/taxanswer/inshi/7108.htm

 

Price on Contract Real Estate Sales Contract Loan Contract
Less than 1 million yen 500 yen 1,000 yen
Less than 5 million yen 1,000yen 2,000 yen
Less than 10 million yen 5,000yen 10,000 yen
Less than 50 million yen 10,000yen 20,000 yen
Less than 100 million yen 30,000yen 60,000 yen
Less than 500 million yen 60,000yen 100,000 yen
Less than 1 billion yen 160,000yen 200,000yen

The above amounts are inclusive of the current reduction measures.

 

 

Registration Tax 登録免許税

When purchasing land or buildings, you must register title with the Legal Affairs Bureau. This will prove the status of your ownership. This registration process requires payment of one-time Registration Tax. (Typically you would hire a Judicial Scrivener to handle this process and pay this tax on your behalf.) Also, the registering of a mortgage will require payment of registration tax.

https://www.nta.go.jp/taxanswer/inshi/7191.htm

Category Tax Rate for Registration Reducing Measures
New Residence Land: Assessed Value x 2.0%

 

Building: Assessed Value x 0.4%

x 1.5%

 

x 0.15%

Pre-Owned Residence Land: Assessed Value x 2.0%

 

Building: Assessed Value x 2.0%

x 1.5%

 

x 0.3%

Establishing a mortgage Loan Amount  x 0.4% x 0.1%

The Assessed Value for real estate assets (固定資産税評価額): is calculated by the local government office. It applies to Property Tax, City Planning Tax, Real Estate Acquisition Tax and Registration Tax.

 

In order to qualify for certain tax reduction measures, the following criteria may apply:

For New Residences:

  1. Floor area of 50sqm or above
  2. Home is for own use

 

Pre-Owned Residences:

  1. Floor area of 50sqm or above
  2. Home is for own use
  3. Built within 20 years or the building has been retrofitted under the new earth quake reststance criteria

 

 

Real Estate Acquisition Tax 不動産取得税

This tax is levied on the acquisition of land and buildings by the prefectural government in which the property is located. This tax does not apply to acquisitions due to inheritance.

Tokyo: http://www.tax.metro.tokyo.jp/english/type_tax.html

Kanagawa: http://www.pref.kanagawa.jp/cnt/f520239/p13774.html

 

New Residences

Tax Rate & Reduction Measures
Building Assessed Value x 3%

Reduction Measures: (Assessed Value – Special Deduction of 12 million yen) x 3%

 

Necessary Conditions for Reduction Measures:

Gross Floor Area Over 50sqm and under 240sqm

Land Assessed Value x 50% x 3% – below deduction amount

 

The greater amount from the two options below can be deducted.

A.   45,000yen

B.   Assessed Value of land per sqm x 50%x (Gross Floor Sqm x 2) x 3%

 

Pre-Owned Residences

Tax Rate & Reduction Measures
Building Assessed Value x 3%

Reduction Measures: (Assessed Value – Special Deduction of below amount) x 3%

 

Completion Date Deduction Amount
April 1, 1976 –June 30, 1982 3.5 million yen
July1, 1982—June 30, 1985 4.2 million yen
July1, 1985 –March 31, 1989 4.5 million yen
April 1, 1989 –March 31, 1997 10 million yen
April 1, 1997 or afterwards 12 million yen

 

Requirments for Reduction Measures:

1.    Housing is for own use

2.    Gross Floor Area  Over 50sqm and under 240sqm

3.    The property must meet one of the following criteria.

A.   It is built after Jan 1, 1982.

B.   Regardless of the age of the building, the building has adopted new earth quake resistance criteria.

Land Assessed Value x 50% x 3% – below deduction amount

 

The greater amount from two options below can be deducted.

A.   45,000yen

B.  Assessed Value of land per sqm x 50% x (Gross Floor Sqm x 2) x 3%

 

 


<Annual Taxes after purchase>

A person owning property on January 1st is responsible for paying Fixed Asset Tax and City Planning Tax.  The City Office where the proiperty is located will send you invoices to pay every year. (You can pay this tax via quarterly or lump-sum payments.)

 

Real Estate Tax  固定資産税

Tokyo: http://www.tax.metro.tokyo.jp/english/type_tax.html

Yokohama: http://www.city.yokohama.lg.jp/zaisei/citytax/shizei/kotei.html

 

Tax Rate and Reduction Measures
Land Assessed Value x 1.4%

 

Reduction Measures:

Land area not over 200 sqm— Assessed Value x 1/6

Land area over 200 sqm — Assessed Value x 1/3

Building Assessed Value x 1.4%

 

Reduction Measures:

Real Estate Tax is reduced to 1/2 for 3 years, if new residence is built before March 31, 2018.

1.    Gross Floor Area for residential use is over 50% of the building gross sqm.

2.    Residential use gross floor area is over 50sqm and below 280sqm.

 

 

City Planning Tax  都市計画税

Tokyo: http://www.tax.metro.tokyo.jp/english/type_tax.html

Yokohama: http://www.city.yokohama.lg.jp/zaisei/citytax/shizei/kotei.html

 

Tax Rate and Reduction Measures
Land Assessed Value x 0.3%
Building Assessed Value x 0.3%

If your property is not in a city or ward but in a town, this city planning tax is not charged.

 

 

 

<Housing Loan Deduction> 住宅ローン控除・住宅借入金等特別控除

This is a special tax deduction that can be applied for in certain cases. 1% of the Remaining Loan Balance can be deducted from personal Income Tax for up to 10 years. The maximum applicable loan limit amount is 40 million yen.

 

Loan Amount          Deduction Rate      Duration

40,000,000 yen  x    1%                    x  10 years    =  Maximum 4 million yen can be deducted over the 10 year period.

 

Requirements:

  1. Move in before Jun 30th, 2019.
  2. Annual Personal Income is below 30 million yen.
  3. Loan Duration is over 10 years.
  4. Registered Floor Area is over 50sqm.
  5. You must file a Personal Income Tax Return.

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