After purchasing property in Japan, the main annual taxes that must be paid include fixed asset tax and city planning tax (collectively referred to as “property taxes”). Additionally, income tax may apply if the property is rented out. Here are the detailed explanations:
1. Fixed Asset Tax
Tax Rate:
The standard tax rate is 1.4% (local governments can adjust this, but not exceeding 2.1%).
Calculation Method:
Fixed Asset Tax = 1.4% of the government-assessed value.
- The assessed value is typically 50% to 80% of the market value and is reassessed every three years.
Reduction Policies:
- Small Residential Land (≤ 200㎡): Taxed at 1/6 of the assessed value.
- General Residential Land (> 200㎡): The portion exceeding 200㎡ is taxed at 1/3 of the assessed value.
- Newly Built Residential Properties (≤ 120㎡): The construction portion is halved for the first five years.
2. City Planning Tax
Tax Rate:
3. Income Tax (e.g., Rental Property)
Rental Income Tax
- Rental Income Tax: After deducting management fees, repair costs, depreciation, and other allowable expenses from rental income, the remaining amount is taxed at progressive rates ranging from 5% to 45%.
Withholding Tax
- If the tenant is a corporation or the property is used for business purposes, a withholding tax of 20.42% on the rent must be deducted. This amount can be claimed back during the annual settlement process.
Reduced Tax Rate
- For annual rental income of 1,950,000 yen or less, a reduced tax rate of 5% can be applied.
4. Other Possible Costs
Management Fees:
For apartments, management fees are typically charged at around 5% plus consumption tax (for rental management services).
Repair Reserve Funds:
These funds are collected for the maintenance of common facilities. The amount varies depending on the property’s condition and specific needs.
5. Payment Methods for Taxes and Fees
Timing:
– Property owners typically receive tax notifications between April and June each year.
-Payments can be made in four installments or as a lump sum.
For Overseas Owners:
-Overseas property owners can delegate the payment of taxes to a management company or tax agent to handle on their behalf.
Summary
Self-Occupied Properties: Primarily subject to Fixed Asset Tax, with available reductions.
Rental Properties: Must additionally report income tax, keeping in mind withholding tax regulations.
Regional Differences: Cities like Tokyo and Osaka tend to have higher tax rates, but they also offer more comprehensive reduction policies.
For inquiries, please call 6810 2200.
