This guide explains how Japanese tax applies when an overseas investor buys, holds, and sells property in Japan. Japanese tax law contains many exceptions; to keep things clear, we set them aside and cover the general rules. Part 1 deals with acquisition and ownership; Part 2 covers the sale and the rules specific to non-residents.
Where the tax is owed
The first rule to understand is that income from real estate is taxed by the country where the property sits. This is the source-country (or situs) principle. It applies regardless of where the owner lives or what passport they hold: being a non-resident of Japan, or a non-Japanese national, does not limit Japan’s right to tax property located in Japan.
Tax treaties confirm this rather than override it. The Japan–Australia Convention, for example, allocates taxing rights over Japanese property to Japan at both stages of ownership:
So an Australian resident who lets Japanese property is taxed in Japan on the rental income (Article 6), and one who sells it is taxed in Japan on the gain (Article 13) — in each case under Japanese law, separately from any tax in Australia. This is not unique to Australia; most of Japan’s treaties follow the same pattern.
Taxes at purchase
Several taxes arise once, at the point of acquisition:
- Registration and license tax (national)
Charged when ownership of the land or building is recorded in Japan’s property register, usually paid through the judicial scrivener (shihō-shoshi) who handles the registration. - Real estate acquisition tax (local)
Levied by the prefecture where the property sits — for example, Hokkaido for a Niseko property — on the fact of acquiring it. - Stamp duty (national)
Paid by affixing revenue stamps to the sale contract and related documents; the amount depends on the document type and the transaction value.
Consumption tax of 10% also applies to the agent’s brokerage fee and the judicial scrivener’s fee.
Taxes while you own and operate
For as long as you hold the property, the following arise every year:
- Fixed asset tax and city planning tax (local)
Charged to whoever owns the property on 1 January each year. The municipality issues a tax notice around spring. - Income tax (national)
If you let the property, the rent is Japan-source income and is taxable in Japan. The Japanese tax year is the calendar year: you calculate the profit for 1 January to 31 December — rent received, less deductible expenses such as management fees, fixed asset tax, and depreciation — then file a return and pay the tax to the local tax office between 16 February and 15 March of the following year.