Who Pays Property Tax in the Year You Buy? How the Pro-Rata Settlement Works for Resale Properties in Japan
Written by：SUMIMOTO Inc.Editorial Policy
When you buy a resale property in Japan, you may be asked at handover for a "fixed asset tax settlement." The tax notice for that year goes to the seller, so many buyers wonder why they also have to pay.
This article explains how fixed asset tax and city planning tax are levied and how the pro-rata settlement works at sale, with a worked example. Amounts are rough guides; always check the sale contract for the actual method.
Who is taxed on fixed asset tax?
Fixed asset tax is levied each year on the person registered as the owner in the fixed asset tax ledger on January 1 (the assessment date). The standard rate is 1.4%, and the municipality calculates the actual amount from the assessed value and sends a tax notice.
City planning tax is a tax that municipalities may levy on owners of land and buildings in areas such as urbanization promotion zones. It is usually notified together with fixed asset tax.
Governing laws
- Local Tax Act, Article 343, Paragraph 1
- Fixed asset tax is levied on the owner of the fixed asset.
- Local Tax Act, Article 350, Paragraph 1
- The standard rate of fixed asset tax is 1.4/100.
- Local Tax Act, Article 359
- The assessment date for fixed asset tax is January 1 of the year in which the fiscal year begins.
- Local Tax Act, Article 702, Paragraph 1
- Municipalities may levy city planning tax on owners of land and buildings in certain areas to fund city planning projects.
How is the tax split when you buy mid-year?
Legally, the taxpayer is the owner on January 1, the seller. So the tax notice for that year goes to the seller, who pays the full amount. But the buyer uses the property after handover, so in practice the two usually split the tax by days.
This settlement is not required by law; it is made under a special clause in the sale contract. The start date is said to be January 1 in some areas (more common in the Kanto region) and April 1 in others (more common in the Kansai region), so check your contract.
Basics of the pro-rata settlement (rough guide)
| Item | Taxpayer | How it is settled |
|---|---|---|
| Fixed asset tax | Owner on January 1 (the seller) | Buyer pays the seller for the days after handover |
| City planning tax | Owner on January 1 (the seller) | Settled by days, like fixed asset tax |
| Start date | As set in the contract | Either January 1 or April 1 is used |
Key figures in this article
- Assessment date for fixed asset tax
- 1January
- Standard rate of fixed asset tax
- 1.4%
- Sample settlement amount
- 60,493JPY
The owner on this day is the taxpayer
May differ by municipality
Annual tax JPY 120,000, handover July 1
How much is the settlement?
As an example, take a property with annual tax of JPY 120,000, a January 1 start date and handover on July 1. July 1 to December 31 is 184 days. The buyer's share is JPY 120,000 × 184 ÷ 365 = about JPY 60,493.
The seller's share covers 181 days from January 1 to June 30: JPY 120,000 × 181 ÷ 365 = about JPY 59,507. The two together equal the annual tax of JPY 120,000.
Watch for handover before the new fiscal year's tax is fixed. In that case the settlement is often based on the previous year's amount with no re-settlement later, so check the contract.
What should you check before signing?
If you live abroad and cannot attend in person, written confirmation matters. Check that the explanation of important matters and the sale contract state the start date, the taxes covered and the calculation method.
From the year after you buy, the notice arrives in your name. If you live overseas, notify the municipality of where to send it or appoint a tax agent so that payment is not delayed.
Common oversights and fixes
✕Left the settlement out of the budget and needed extra cash just before handover.
→Ask for fixed asset tax and city planning tax settlements to be included in the cost estimate.
✕Did not check whether the start date is January 1 or April 1 and was billed an unexpected amount.
→Confirm the start date and how days are counted in the contract in advance.
✕The next year's notice kept going to the seller's address and payment was late.
→After the transfer, notify the municipality of the notice address or your tax agent.
✕Did not read the breakdown and overlooked city planning tax.
→Check each tax and the number of days in the settlement statement.
Settlement checklist
- I confirmed the start date (January 1 or April 1) in the contract
- I confirmed which taxes are settled
- I confirmed the handover date and how days are counted
- I put the estimated settlement in my budget
- I checked where future tax notices will be sent
- I asked a licensed real estate agent or tax accountant about unclear points
Frequently asked questions
- Q. Can the settlement be negotiated?
- A. It is made under a clause in the contract, so before signing there may be room to discuss. If it departs from normal practice, ask why.
- Q. Is there a settlement for new-build properties too?
- A. When you buy a new property directly from the seller and handover is mid-year, a settlement is commonly made as well. Check the contract.
- Q. Where can I see the tax amount?
- A. On the previous year's tax notice or the tax statement the seller shows you. You can also request a property valuation certificate from the municipality.
- Q. What if handover spans the New Year?
- A. Once January 1 passes, the new year's owner becomes the taxpayer. The tax year being settled changes, so check the contract date and start date.
In the SUMIMOTO Hub app, the 24-hour AI advisor explains fixed asset tax and cost settlements in your language. For your actual settlement and tax amounts, also consult a licensed real estate agent or tax accountant.
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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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