FAQ

Welcome to our guide for international buyers interested in purchasing real estate in Japan. We know navigating a new country's legal and financial systems can be challenging, so we've simplified the key information you need about taxes and financing.

Important Note: While we've done our best to provide accurate information, tax laws are complex and can change. We strongly recommend consulting with a certified professional for personalized advice regarding your specific transaction. This guide focuses on directly buying property in Japan and doesn't cover all specific tax exceptions or reductions.

When you purchase real estate in Japan, you'll encounter several types of taxes.

Consumption Tax (Shouhizei): This is Japan's sales tax, similar to VAT or GST. It applies to the sale of a building but not the land itself. In Japan, ownership of a building and its land are distinct legal rights. So, if you buy both, you'll only pay consumption tax on the building's price. While the seller is legally responsible for this tax (currently 10%), buyers typically pay this amount to the seller along with the purchase price. Some sellers, like those with lower annual revenue, might be exempt.

Fixed Asset Tax & City Planning Tax: As a property owner, you'll pay these taxes annually. Fixed Asset Tax (Koteishisanzei) is 1.4% of the property's value as assessed in the "fixed asset tax book." City Planning Tax (Toshi Keikakuzei) is an additional 0.3% of this value, but only applies to properties in designated "city planning areas." Both are paid quarterly to local city authorities in April, July, December, and February. If you buy a property mid-year, it's standard for the seller to ask you to pay your share of these taxes for the remainder of the year.

The "Big Three" Purchase Taxes: These are one-time taxes you pay when acquiring real estate.

• Real Estate Acquisition Tax (Fudousan Shutokuzei): You pay this tax every time land or buildings are transferred, regardless of official registration or the purchase price. It's calculated at a basic rate of 4% of the property's value as indicated in the "fixed asset tax book."
• Registration Tax (Touroku Menkyozei): This tax is for officially recording your ownership and other legal interests, like mortgages, at the Legal Affairs Bureau. This public record formally recognizes your property rights. The tax is based on the property's "fixed asset tax book" value. Rates vary: 0.4% for initial ownership registration (e.g., after new construction), and 2% for transferring existing ownership. For mortgages, it's 0.4% of the loan amount. Be aware that special, temporary reductions often apply, especially for residential properties or land transfers, so it's crucial to check current rates.
• Stamp Tax (Inshizei): This tax applies to various real estate documents, including purchase agreements, lease agreements, and construction contracts. You'll need to affix special stamps to each executed copy of the agreement; the cost depends on the agreement's value (e.g., the purchase price). For instance, a purchase agreement between 500 million and 1 billion JPY has a standard stamp tax of 200,000 JPY. While technically the document drafter buys the stamps, who pays this cost is typically negotiated.

This section is relevant if you plan to sell your Japanese property in the future.

Generally, non-residents or foreign companies without a "permanent establishment" (a fixed business presence) in Japan are not subject to Japanese income tax. However, gains from selling Japanese real estate are considered "Japan-source income" and are taxable, even for non-residents.

Tax rates on these gains vary. For Japanese companies, profits are taxed at their standard corporate income tax rate. Foreign companies with a permanent establishment face differing rates based on the establishment type. For non-resident individuals without a permanent establishment, the tax rate depends on how long you owned the property: 30% if held for five years or less, and 15% if held for more than five years.

Additionally, when a non-resident sells Japanese real estate, a portion of the sale proceeds is usually withheld (deducted at source) as a tax prepayment, typically around 10.21%. This amount can vary based on the seller's location and any tax treaties Japan has with their home country.

It's important for non-resident individual buyers to understand that any future sale of Japanese real estate will incur Japanese capital gains tax and withholding tax, regardless of your residency status at the time. Also, any rental income from the property will be subject to a withholding tax (generally 20.42%) before being sent abroad. Specific tax rates depend on your country of origin and applicable tax treaties.

This information is based on tax laws as of July 2015. Always consult a professional for the most current advice.

Securing a home loan in Japan as a foreigner is possible, but it depends on your residency status, income, and work history.

If you are a permanent resident or married to a Japanese citizen, you'll generally need proof of income (annual tax withholding slips) and several years of stable employment with the same company. If you are a long-term resident with significant work experience in Japan (or have a spouse with a permanent visa), you'll also need income proof and typically a more established work history in Japan. For non-resident foreigners, finding a lender in Japan is generally very difficult, though some may consider cases individually. For example, Chinese nationals might find options with the Bank of China in Tokyo or Shinsei Property Finance (for Hong Kong residents), depending on their worldwide assets.

Most lenders require you to be under 75 years old when the loan is fully repaid. You must also qualify for Group Credit Life Insurance, which protects the lender if you can't repay due to illness or death. This insurance is often a requirement, with fees sometimes included in your monthly payments. Crucially, all loan documents will be in Japanese, so comfort with the language is essential; English translations are usually for informational purposes only.

It's generally easier to get financing from foreign banks or smaller, local credit unions than from major Japanese "high street" banks. Currently, Suruga Bank, Shinsei Bank, the Bank of China, and SMBC Prestia are known to work with foreigners in Japan. The market for home loans changes frequently, so it's wise to check for new lenders.

When buying a pre-owned detached house, Japanese banks often base their loan amount primarily on the value of the land, attributing less value to the building. This is because new houses in Japan tend to depreciate quickly and are often torn down within 30-35 years. This means your loan will likely only cover part of your total cost. In Tokyo, for example, land value typically accounts for 70-85% of the total purchase price. So, be prepared to pay at least 20-35% of the purchase price out-of-pocket to cover the down payment, earnest money, and various incidental fees like taxes and agent fees. There are also separate fees for registering the mortgage. While it might be possible to borrow more than 85% in specific cases, it depends on the bank's property appraisal and your individual situation.

Always speak with a lender or lenders before making an offer on a property. While purchase agreements often allow you to withdraw if financing falls through, sellers prefer working with buyers who have dependable financing already in place.

Banks often charge fees or restrict early loan repayments these days because they lose out on future interest earnings. Therefore, it's crucial to verify the early repayment terms and any associated fees before taking out a loan.