Real Estate Acquisition Tax in Japan: A Quick & Easy Guide
Wondering what type of real estate taxes you'll need to handle when purchasing real estate in Japan?
Today, we look at Japan’s real estate acquisition tax, sent out 6 months to a year after your property registration. We’ll cover how much to expect and how to pay it.
What is real estate acquisition tax?
Real estate acquisition tax (aka property acquisition tax) is called Fudōsan Shutoku Zei (不動産取得税) in Japanese, and it is a one-time tax levied anytime ownership of land or buildings changes hands, is newly acquired, or newly constructed.
In general, this tax is applied even if the real estate came at no additional cost.
This tax is separate from the registration and license tax, fixed asset tax, or city planning tax.
Who must pay real estate acquisition tax?
Anyone who purchases property in Japan is subject to real estate acquisition tax. Additionally, anyone who receives property will be subject to this tax.
However, there are certain conditions where you will not need to pay this tax.
For example, if the deductions that are apply to your situation exceed the standard tax rate. We'll get into this further later on in the article.
How much will my real estate acquisition tax be?
The standard real estate acquisition tax rate is the property's assessed value x the tax rate (4%), which equals the tax amount.
The assessed value is the "fixed asset" value determined by the city in which your property resides. You can learn more about fixed asset value and fixed asset tax in this article.
While the current rate is 4% for residential properties, there are various deductions that will reduce your real estate acquisition tax bill.
Deductions that apply to real estate acquisition tax
The government has reduced real estate acquisition tax from 4% to 3% for land and housing, effective until March 31, 2027. Non-residential buildings will continue to be taxed at 4%.
Additionally, the government has put into place special provisions that reduce real estate acquisition tax. You can expect the following deductions if and when applicable to your case:
1. New home purchase deduction
For newly built homes, 12 million yen is deducted from the assessed value. However, the floor area must be between 50 and 240 square meters. Other conditions may apply.
2. Land purchase for residential use deduction
If you acquire land for residential use, the tax amount will be reduced by the higher number of either
1.5 million yen x tax rate
Price per square meter of land x twice the floor area of the house (up to 200 square meters per house) x tax rate
However, to receive this reduction, certain conditions must be met, such as a new house being constructed on the land within a certain period from the date of land acquisition.
3. Certified long-term quality housing deduction
Newly constructed homes with a long-term quality designation are elegible for a 13 million yen deduction. This tax reduction measure is available until March 31, 2026.
This tax measure promotes the creation of new buildings that adhere to the highest building codes for earthquake resistance, durability, variability, etc., and ensures appropriate maintenance and preservation.
4. Used house purchased for residential use
Certain deductions will apply if you purchase a used house for personal use, and the floor area is between 50 and 240 square meters. The used house must meet the new earthquake resistance standards (for new buildings built after January 1, 1982, etc.), and the tax reduction rate will depend on the year the house was constructed.
Additionally, there are some reductions available depending on the locality of your property. To learn more about specifics related to your upcoming real estate acquisition tax bill, talk to your real estate agent, or call the city's legal affairs bureau.
How to pay your real estate acquisition tax bill
This bill is administered at a regional level, and it is sent to your registered property 6 months to 1 year from the date of when you have filed your property registration.
The tax notice will include a payment slip, which will also list where the bill can be paid and when the bill is due.
Typically, such tax bills can be paid at your local city office, a convenience store, or the post office.
For any non-resident property owners, consider using a tax representative service like MailMate, which can serve as a liaison between you and the local tax office.
MailMate's fluently bilingual tax representative service helps property owners stay up to date on their real estate tax bills by liaising between clients and the local government.
The service includes the following features:
Tax representative for annual real estate tax payments
Bill pay support for property tax payments
Tax notifications with English summaries
A virtual mailbox to receive the mail that arrives at your Japanese property
Manage important property documents and notifications in one place
Other services MailMate offers include utility and Internet setup of your Japanese property!
Cases where real estate acquisition tax is 0 yen
According to Lifull Homes, a real estate communications agency in Japan, here are the primary reasons when no tax is levied, even when real estate changes hands.
1. Real estate or land's assessed value is low
If the assessed value of the land is worth less than 100,000 yen, or if newly built, expanded or renovated buildings are worth less than 230,000 yen, or if the acquired buildings are worth less than 120,000 yen. In any of the aforementioned cases, there will be no property acquisition tax.
2. Real estate acquired through inheritance
Real estate acquired through inheritance is not subject to real estate acquisition tax. Instead, inheritance taxes apply.
3. Real estate acquired through land rezoning
If you acquire land as a result of land readjustment, you will not be liable for real estate acquisition tax. Additionally if you have a road for public use on your property, such roads are exempt from property acquisition tax.
4. Real estate acquired by certain organizations for specific reasons
Certain corporations, such as schools, religious organizations, and welfare organizations, are exempt from tax when they acquire real estate for use in their stated objectives. For example, a school purchasing property to expand its grounds, which will be used by students or teachers, will not be taxed.
5. Real estate acquired through corporate mergers
If a corporation undergoes reorganization through a merger or split and obtains real estate, it is tax-exempt. This exemption occurs because the ownership of the real estate changes, rather than it being newly acquired. Nonetheless, there are specific conditions that apply.
Frequently asked questions
What is the property purchase tax in Japan?
Property purchase tax, also known as real estate acquisition tax, is a tax levied on property owners when land or property is purchased. In Japanese, it is called fudousan shotoku zei.
How do you calculate property tax in Japan?
The standard rate for real estate acquisition tax in Japan is 4%. However, in many cases this tax rate will be reduced to 3% until March of 2027. For a rough estimate of your upcoming property acquisition bill, see MailMate's property tax calculator.
What other property-related taxes must I pay?
Other property related taxes include registration tax, fixed asset tax, city planning tax, and consumption tax if your property generates revenue.
In closing
Knowing if and when your tax bill is due and how to pay it will give you peace of mind that you're complying with Japanese tax law.
For further peace of mind, consider appointing MailMate as your tax representative.
Founded in 2019, MailMate has simplified property ownership for foreigners living abroad and is an increasingly popular option recommended by users and well-known industry figures.
Additionally, if you use MailMate's tax representative service for property owners, MailMate will take care of filing the tax representative form with the relevant tax office on your behalf.
Navigate Japan's tax system with an experienced tax representative service tailored for foreign property owners!
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