Understanding Japan Property Tax: What Foreign Owners Need to Know

Even if you’re a foreign national, owning real estate in Japan comes with tax obligations. In this guide, we’ll break down the key taxes that apply to property owners in Japan—such as the fixed asset tax and real estate acquisition tax—and explain what foreign investors and long-term residents should keep in mind. Since Japan’s tax laws apply equally regardless of nationality, having the right knowledge helps you avoid unexpected expenses or legal troubles. By working with a trusted real estate agent experienced in supporting international clients, you can confidently manage and maintain your property in Japan.

Japan's Property Tax Also Applies to Foreign Owners

In Japan, anyone who owns real estate is subject to property tax, regardless of nationality. Even if you are a non-resident living overseas, you are still required to pay taxes on any property you own in Japan. And you might be wondering, “Why do I need to pay property tax?” This is because Japan’s property tax system is based on the location of the property itself. As long as your real estate is situated in Japan, the same tax rules apply equally to everyone. Therefore, it’s crucial for foreign investors to understand the different types of taxes and how to pay them before purchasing property in Japan.

Major Types of Property Tax in Japan

In Japan, different taxes apply at each stage of real estate ownership—when you acquire, hold, or sell a property. Some taxes are paid only once upon purchase, others are charged annually, and some apply only when you earn a profit from selling. Below is an overview of the main types of property taxes, when they occur, and the standard tax rates you can expect to pay.

Fixed Asset Tax

If you're wondering "is there property tax in Japan?", the primary one is the Fixed Asset Tax. This is an annual tax imposed on property owners as of January 1 each year. The standard tax rate is approximately 1.4% of the assessed value of the property. Additionally, properties located within urban planning areas may be subject to a city planning tax of up to 0.3%. This is one of the most common recurring taxes during the ownership period. For new residential buildings that meet specific criteria, the fixed asset tax on the building portion is reduced by half for three years (or five years for condominiums). To qualify for this reduction, the property must meet certain conditions related to total floor area and usage.

Real Estate Acquisition Tax

This is a one-time local tax charged when purchasing real estate. The standard rate is 4% of the assessed value of the land or building, but a reduced rate of 3% may apply for residential properties. Newly built homes or properties that meet specific requirements may also qualify for further reductions. This tax is paid only once after the purchase, upon receiving a tax notice from the local government. To receive the residential reduction, the property must meet certain criteria, such as its intended use and total floor area. It’s best to confirm the details with your local municipality or real estate agent in advance.

Capital Gains Tax

When you sell a property for a profit, you are subject to capital gains tax. If you have owned the property for five years or less, the short-term capital gain is taxed at 30% (income tax) and 9% (resident tax), for a total of 39.63%. For properties owned longer than five years, the long-term capital gain is taxed at 15% (income tax) and 5% (resident tax), for a total of 20.315%. These totals include the 2.1% Reconstruction Special Income Tax (a surtax on the national income tax portion) introduced after the 2011 Great East Japan Earthquake. Ownership period is determined as of January 1 of the sale year, not the exact date of transfer.

Registration and License Tax

This tax applies when registering property ownership transfers or mortgage rights. The tax rate varies depending on the type of registration. Typically, the rate for an ownership transfer (due to a sale) is 2.0% (though it can be reduced to 1.5% under certain conditions). Initial ownership registration (for a new build) is 0.4%, and mortgage registration is also set at 0.4%.

Stamp Duty

Stamp duty is a tax on official documents, such as real estate sales contracts. A “revenue stamp” corresponding to the contract's value must be affixed to the document. The amount is tiered based on the sale price—for example, a contract between ¥10 million and ¥50 million requires a ¥10,000 stamp (under current reduced rates). The higher the transaction amount, the higher the tax, so it’s wise to confirm the exact stamp duty required before signing.

Inheritance and Gift Tax

When property is acquired through inheritance or as a gift, inheritance or gift tax applies. The inheritance tax rate depends on the total value of the deceased’s estate and the heir's relationship to the deceased, while gift tax is based on the value of the property received. Both taxes offer various deductions and exemptions, so understanding these rules in advance is essential for proper planning. Foreigners living in Japan may be taxed on worldwide assets depending on their residence status, while non-residents are generally taxed only on assets located in Japan.

Important Tax Considerations for Foreign Property Owners in Japan

How to Pay Property Tax from Overseas (The Tax Agent System)

For foreigners living abroad, the most reliable way to pay Japan’s fixed asset tax is by appointing a Tax Agent (Nōzei Kanrinin). By designating a tax agent, you can have property tax notices sent to a representative in Japan, who can also handle payments on your behalf—ensuring smooth tax management even while you’re overseas.

In Japan, property tax notifications are sent to a domestic address by default. Therefore, non-residents who own real estate in Japan are required to appoint a tax agent to receive tax notices and handle payments and filing procedures. The tax agent acts as your local representative, communicating with municipal offices and tax authorities. Appointing a trusted tax agent early—ideally at the time of property purchase—helps prevent delays or payment issues while you are abroad. This appointment must be officially notified to the municipal tax office through a designated form.

Risk of Double Taxation

Foreign property owners in Japan may face “double taxation,” which is when the same income is taxed in both Japan and your home country. However, Japan has tax treaties with many countries designed to prevent or reduce this burden. Depending on your situation, you may qualify for tax relief, exemptions, or a foreign tax credit under these agreements. For example, U.S. and U.K. residents can claim tax credits for Japanese property income under their respective tax treaties. It’s advisable to review both Japan’s tax laws and your home country’s regulations, and seek guidance from a qualified tax professional to ensure compliance and avoid paying unnecessary taxes.

Commonly Confused Tax Terms

The term “Real Estate Tax” is often used as a general expression referring to all property-related taxes in Japan, but it doesn’t correspond to one specific tax. Additionally, “Residential Tax (Jūminzei)” refers to a local income-based tax on residents, which is entirely different from property taxes. Understanding these distinctions is important for accurate tax reporting and communication with local authorities or real estate agents.

FAQ: Common Questions About Japan Property Tax from Foreign Buyers

Q: Does Japan have property tax?
A: Yes. Japan imposes a property tax called Kotei Shisanzei (Fixed Asset Tax). It applies annually to land and buildings owned as of January 1 each year, with a standard tax rate of 1.4% of the assessed value. In urban areas, an additional City Planning Tax of up to 0.3% may also apply.

Q: Are there differences in property tax between Tokyo and Osaka?
A: The basic tax rates are the same nationwide—1.4% for the fixed asset tax plus up to 0.3% for the city planning tax. In most parts of Tokyo’s 23 wards and in Osaka City, both taxes apply, resulting in an effective rate of about 1.7%. However, for small residential lots, the taxable land value may be reduced by up to 1/6 under special exemptions, significantly lowering the actual tax burden.

Q: Do foreigners also need to pay property tax in Japan?
A: Yes. Regardless of nationality or residency status, anyone who owns real estate in Japan is required to pay property taxes. Even non-residents must pay fixed asset tax and city planning tax, and they are required to appoint a “Tax Agent” within Japan to handle the necessary procedures and payments.

Consult Experts and Trusted Real Estate Agents

Japan’s property tax system can seem complex, but understanding the basics allows you to own and manage property with confidence. For foreign owners, consulting with a certified tax professional and an experienced, English-speaking real estate agent is key to ensuring accurate tax compliance and efficient asset management.

At Japan-Property, we connect international buyers and investors with trustworthy real estate agents who specialize in assisting foreigners. If you’re planning to own or invest in property in Japan, Japan-Property is your reliable partner for professional support and peace of mind.

For more details about housing loans and mortgage options, visit our Japan Mortgage & Home Loan Guide.

For an overview of the property purchasing process and key points to consider, see Buying Property in Japan.