What Tax Do You Pay When Selling Property in Japan? Gains and Withholding
Selling Japanese property at a gain brings it into the capital gains regime. It is taxed separately from employment or business income, and the rate turns sharply on how long you held the asset. Selling while resident overseas adds withholding by the buyer on top.
What is actually taxed on a sale?
Not the sale price. The taxable figure is the gain left after deducting the acquisition cost and the costs of sale. Acquisition cost includes the purchase price plus items such as agency fees and registration tax — but for the building portion, accumulated depreciation over your holding period is stripped out first.
Rate benchmarks
- Long-term gains rate
- 20.315%
- Short-term gains rate
- 39.63%
- Withholding when buying from a non-resident
- 10.21%
Held over 5 years; income, reconstruction and resident tax combined
Held 5 years or less
Not required in certain cases
How does the holding period change the rate?
The rate roughly doubles either side of the five-year line. Selling short-term is expensive enough that timing the sale is itself part of the return.
Rates by holding period
| Category | Holding period | Income tax (incl. reconstruction surtax) | Resident tax | Total |
|---|---|---|---|---|
| Long-term gain | Over 5 years | 15.315% | 5% | 20.315% |
| Short-term gain | 5 years or less | 30.63% | 9% | 39.63% |
The governing provisions
- Income Tax Act, Article 33
- Income from the transfer of assets is treated as capital gain, computed after deducting the acquisition cost and the expenses of transfer.
- Act on Special Measures Concerning Taxation, Articles 31 and 32
- Gains on land and buildings are taxed separately from other income, and split into long-term and short-term according to whether the holding period exceeds five years.
- Income Tax Act, Article 212(1)
- A person paying Japan-source income to a non-resident must withhold income tax and pay it to the state.
- Act on Special Measures Concerning Taxation, Article 35
- Provides a special deduction of up to ¥30 million from the gain on the transfer of a residential property, subject to conditions.
What does the buyer withhold from a non-resident seller?
Where a non-resident sells Japanese property, the buyer generally withholds 10.21% of the price and pays it to the tax office. The exception is where the price is ¥100 million or less and the buyer is an individual acquiring it as a residence for themselves or a relative. The amount withheld is later reconciled against your final liability through the annual return. Note too that non-residents are generally outside the scope of resident tax, having no domicile in Japan on the assessment date.
What if you cannot find the acquisition cost?
For older properties, or ones acquired by inheritance, the original contract can be long gone. In that case 5% of the sale proceeds may be treated as a deemed acquisition cost. The actual cost usually exceeds that, and the shortfall lands straight on your taxable gain. Keep contracts, receipts and transfer records until the sale is complete.
Can you use the ¥30 million exemption?
Selling a home you lived in can qualify for a special deduction of up to ¥30 million against the gain. Where you have already moved out, the sale generally has to complete by 31 December of the year containing the third anniversary of your departure, among other conditions. Whether it applies to a sale after relocating abroad is highly fact-specific — confirm with a tax accountant before you sell.
Common oversights and what to do instead
✕Counting five full years from acquisition and being taxed at the short-term rate.
→Check whether the period exceeds five years as at 1 January of the year of sale, then set the timing.
✕Disposing of the purchase contract, leaving only the 5% deemed acquisition cost.
→Retain the contract, receipts and agency fee records until the sale completes.
✕Not realising withholding applied, so the net proceeds fell short of the funding plan.
→Confirm the withholding position and amount before contracting, and plan on the net figure.
✕Leaving Japan without appointing a tax agent, stalling the annual return.
→Appoint a tax agent and notify the tax office before departure.
Before you sell
- Gathered the purchase contract and receipts for acquisition costs
- Established accumulated depreciation on the building
- Checked the holding period as at 1 January of the year of sale
- Confirmed the withholding position and rate with buyer and agent
- Built the funding plan on net proceeds
- Checked eligibility for the ¥30 million deduction
- Appointed a tax agent and filed the notification
- Engaged a tax accountant for the return
Frequently asked questions
- Q. Do you still file if the sale produced a loss?
- A. Even with a loss, a return may be needed to recover tax already withheld. Treatment depends on the circumstances, so confirm with a tax accountant.
- Q. Is the 10.21% withheld ever refunded?
- A. It is reconciled against your final liability through the annual return. If the final figure is lower, the difference is refunded.
- Q. What is the acquisition cost for an inherited property?
- A. You generally inherit the deceased's acquisition cost and acquisition date. Check early whether the supporting records still exist.
- Q. Will you also be taxed at home?
- A. That depends on your country of residence and any tax treaty. For double taxation relief, consult a specialist familiar with both systems.
The SUMIMOTO Hub app uses AI to indicate a likely sale price range from district transaction data, set against your holding cash flow so you can weigh the timing. For the actual computation and filing, confirm with a Japanese tax accountant and the tax office. Tax rules change — check the current position when you decide.
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