Nobody explains Japanese property taxes in plain English until after you've signed. Here's what foreign owners actually pay — year one and every year after.
The two annual taxes on Japanese property
Every owner of Japanese real estate pays two recurring taxes, regardless of nationality or residency status:
Fixed asset tax (固定資産税 — koteishisanzei) This is the main one. It's calculated on the assessed value of the land and building as determined by the municipal government, reassessed every three years. The standard rate is 1.4% of assessed value. The assessed value is typically 60–70% of market price, so the effective rate on what you paid is closer to 0.85–1.0%.
City planning tax (都市計画税 — toshi keikaku zei) Applies in urbanized areas — which includes all of greater Tokyo and Chiba. Rate is capped at 0.3% of assessed value. In practice almost all municipalities charge the full 0.3%.
Combined, owners typically pay 1.4–1.7% of assessed value per year, or roughly 0.9–1.1% of actual purchase price.
Example: ¥30 million condominium in Funabashi
| Item | Amount |
|---|---|
| Purchase price | ¥30,000,000 |
| Assessed value (estimate) | ¥18,000,000 |
| Fixed asset tax (1.4%) | ¥252,000/year |
| City planning tax (0.3%) | ¥54,000/year |
| Total annual tax | ¥306,000/year |
That's approximately ¥25,500/month — a meaningful but manageable carrying cost.
New construction reduction
For new-build condominiums, there's a significant temporary reduction:
- First 5 years: Fixed asset tax on the building portion is halved
- Applies only to residential units under 120 sqm (the excess is taxed normally)
- Land is not eligible for this reduction
- After 5 years, the full rate kicks in — plan for the jump
This is one of the few tax advantages that applies equally to foreign owners.
When you pay
Japan's fiscal year runs April–March. Fixed asset tax is billed in May or June each year, with the option to pay in four installments (May, July, December, February) or as a lump sum.
After purchasing, you receive a tax notice at your registered address in Japan. If you're a non-resident, you need a tax representative (納税管理人 — nōzei kanrinin) — a person or professional service based in Japan authorized to receive official correspondence on your behalf.
Rental income tax
If you rent your property, rental income is subject to Japanese income tax:
- Non-residents: Flat 20.42% withholding tax on gross rental income (not net of expenses). Your tenant or property manager is required to withhold this amount.
- Residents: Ordinary income tax rates (progressive, 5–45%) plus local inhabitant tax (10%), net of allowable deductions including depreciation, management fees, interest, and repairs.
Non-residents who file a tax return in Japan (optional but often beneficial) can deduct expenses and may reduce their effective rate significantly, especially in early years when depreciation is high.
Capital gains tax on sale
When you sell:
- Residents: Progressive income tax rates if held less than 5 years; lower long-term capital gains rates (20.315% including inhabitant tax) if held 5+ years from January 1 of the sale year.
- Non-residents: Flat 10.21% withholding on gross sale price (not gain), deducted by the buyer. You can file a Japanese tax return to calculate actual capital gains and potentially receive a refund.
The non-resident withholding on gross price can feel punishing if your gain is small relative to price. On a ¥30M property with a ¥2M gain, the withholding would be ¥3.06M — more than the gain. Filing a return and paying on actual profit is almost always better.
Inheritance and gift tax: the risk most foreigners miss
Japan's inheritance tax is among the highest in the OECD — top rate of 55% on large estates. More importantly for foreign nationals: if you hold Japanese real estate, that asset is generally subject to Japanese inheritance tax, and the exact scope of liability for non-resident heirs depends on the heir's residency status, domicile, and the specific circumstances of the estate. This is a complex area of international tax law. Speak to a bilingual Japanese estate planning specialist before structuring ownership of high-value properties — the applicable rules are nuanced and fact-specific.
What you don't pay: purchase taxes
At acquisition, you pay:
- Real estate acquisition tax (不動産取得税): 3% of assessed value for residential property (normally 4%, reduced by special provision). One-time, paid roughly 6 months post-purchase.
- Registration tax (登録免許税): 0.3–0.4% for new builds, 2% for resale (reduced rates subject to certain conditions).
- Stamp duty (印紙税): ¥10,000–¥60,000 depending on contract amount.
- Agent commission: Capped at 3% + ¥60,000 + consumption tax.
These are front-loaded. Annual carrying costs are relatively low by global standards.
Summary: what Japan property actually costs to hold
| Cost | Frequency | Rough rate |
|---|---|---|
| Fixed asset tax + city planning tax | Annual | 0.9–1.1% of purchase price |
| Rental income tax | If renting, annual | 20.42% gross (non-resident withholding) |
| Condo management fee (管理費) | Monthly | ¥8,000–¥25,000 typical |
| Repair reserve fund (修繕積立金) | Monthly | ¥5,000–¥20,000, increases over time |
Japan's carrying costs are low relative to most comparable markets. The complexity is in the tax filing infrastructure — especially for non-residents who need a Japan-based representative and, ideally, a Japanese accountant for returns.
Data on assessed values reflects general market estimates. Tax rates and provisions are subject to change — consult a licensed Japanese tax accountant (税理士) for advice specific to your situation.