What is capital gain tax when selling real estate property in Japan?

  • 31-07-2023
  • ["capital_gain_tax"]

Tax imposed on capital gains earned from selling a property in Japan differ depending on the period of ownership.

Resident Period of ownership is less than 5 years, 39.63% Period of ownership is 5 years or more, 20.315% Non-Resident Period of ownership is less than 5 years, 30.63% Period of ownership is 5 years or more, 15.315% Tax rate is lower for Non-resident since local inhabitant tax is not imposed (less than 5 years 9%, 5 years of more 5%)

-

Make sure to be careful that the 5 years ownership period has passed on January 1 st of the year you sell your property. The ownership period is calculated from the date you purchased your property and January 1 st of the year you sell the property.

-

Example Purchased the property on July 1 st , 2018. Sold the property on August 1 st , 2023. Since on January 1 st , 2023, the property ownership period is only at 4 years and 6 months, the imposed tax falls in the category of less than 5 years. You will need to sell the property on January 1 st , 2024 in order to be considered 5 years or more ownership.

-

Below describes exceptions in the case of selling real estate property used for your own residence (only applied for resident) Exceptions when you are selling a house that you live in for over 10 years. A house purchased more than 10 years can be eligible to receive reduced tax rate. JPY60,000,000 or below tax rate 14.21%, over JPY60,000,000 tax rate 20.315%, after deduction of JPY30,000,000.

Special conditions

In the case of selling your house, house and land, or land lease you are a resident of.

In the case of selling your previous house that you have been using as a residence, needs to be sold by the end of December 31 st within 3 years from the time you no longer reside. In the case you have not received JPY30,000,000 deduction and certain special conditions within the previous year and the year before last of selling your house you lived in. In the case you have not received certain special condition for purchasing replacement or exchange residence house for the year, the previous year, and the year before last. In the case a house that has been destroyed by natural disasters, the house will need to sell by the end of December 31 st within 3 years from the time you no longer live on the property. In the case seller and buyer are unrelated nor married.

Method of calculating the amount of capital gain tax on an income property

Example Period of ownership 6 years Income earned from the transfer of property(sale price): 130,000,000　 proportion of building 50% land 50% Transfer expenses (cost for selling): 4,000,000 Purchasing price: 100,000,000 proportion of building 50% land 50% Cost of purchase: 5,000,000 Structure: Steel reinforced concrete

-

  1. Depreciation calculation 52,500,000 x 0.9 x 0.003 x 6(years) = 10,395.000
  2. Acquisition cost calculation 52,500,000 – depreciation 10,395,000 +52,500,000(land) = 94,605,000
  3. Capital gain calculation 130,000,000 – 4,000,000 – (52,500,000 – 10,395,000 building) – 52,500,000 land=31,395,000

  4. Capital gain tax calculation\ Resident: 31,395,000 x 20.315% = Approx. 6,377,000

    Non-resident: 31,395,000 x 15.315% = Approx. 4,808,000



Written by Tsuyoshi Hikichi

At Azuki Corporation we provide advice to find the best property based on our client’s request.  We are here for you, please do not hesitate to contact us with any questions.

For real estate advice please press HERE