What Taxes Do You Pay Every Year After Buying Property in Japan?
Written by：SUMIMOTO Inc.Editorial Policy
There are two main local taxes: fixed asset tax and, if the property is in an urbanization promotion area, city planning tax. The amount is not based on what you paid but on the fixed asset tax assessed value set separately by the municipality. Generally, the standard fixed asset tax rate is 1.4% and city planning tax is capped at around 0.3%.
Who pays, and when?
The tax is assessed as of 1 January each year. Whoever is registered as owner on that date bears the full year's tax. Even if you sell on 2 January, the seller is in principle liable for that year.
The pro-rated settlement often made at handover is a private adjustment between seller and buyer, not tax paid to the municipality. Whether it is made depends on the sale contract.
What reliefs are there?
Residential land has a special rule for the tax base: small residential lots up to 200 square metres are reduced to one sixth, and the portion above that to one third. Qualifying new homes may also have the building portion reduced for a set period.
Tax can rise when a new-home reduction period ends, at the three-yearly reassessment, or if demolishing a building removes the residential land rule. The assessed value appears on the tax statement that comes with each year's tax notice.
Legal basis
- Local Tax Act (地方税法), Article 350
- Sets the standard fixed asset tax rate at 1.4%, while allowing municipalities to adopt a different rate by local ordinance.
- Local Tax Act (provisions on city planning tax)
- Limits city planning tax to land and buildings within urbanization promotion areas, and caps the rate municipalities may set at 0.3%.
- Local Tax Act (地方税法), Article 349-3-2
- Provides the special reduction to the taxable base for residential land: one-sixth for small-scale residential land up to 200 sqm, and one-third for the portion of general residential land beyond that.
FAQ
- Q. If a home is sold partway through the year, who pays that year's fixed asset tax?
- A. By law, whoever owned the property on January 1 of that year, usually the seller, owes the full year's tax. The municipality never bills the buyer directly for that year.
- Q. Can the tax bill suddenly jump the following year?
- A. Yes. This can happen when a new-build reduction period ends, when the assessed value changes at a 3-year revaluation, or when a residential land reduction is lost, for example after a building is demolished.
Actual amounts and conditions vary by municipality and property. Please check with the local municipal office or a tax accountant.
Want the full picture?
How Much Is Property Tax in Japan? A Fixed Asset Tax Guide
References & Sources
This article provides general information as of its publication date and is not individual legal, tax or investment advice. It was written with the help of generative AI.Editorial Policy
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