How Much Tax Do You Pay When Selling Japanese Real Estate? Long-Term vs Short-Term Capital Gains Tax
Written by：SUMIMOTO Inc.Editorial Policy
When selling real estate in Japan, how much tax a gain will cost is a major factor in the decision. The rate changes sharply with the holding period, and the same gain can carry nearly double the burden.
This article outlines the basics of capital gains tax, the long-term vs short-term split, the calculation flow, and the residence exemption as general guidance. Final amounts depend on individual circumstances, so consult a qualified tax professional before filing.
What is capital gains tax and how is it calculated?
It is the tax on profit (capital gain) from selling real estate, consisting of income tax with the special reconstruction surtax plus resident tax. The gain is generally calculated as sale price minus (acquisition cost + transfer costs).
Acquisition cost is generally the purchase price plus purchase-related expenses, less depreciation on the building for the period you owned it. If documents are missing and the cost is unknown, an estimate of 5% of the sale price may be used. Transfer costs include brokerage fees and stamp duty.
Numbers to keep in mind
- Long-term test
- 5years+
- Long-term rate
- 20.315%
- Short-term rate
- 39.63%
- Residence special deduction
- 30,000,000yen
Ownership as of January 1 of the year of sale
Income + surtax 15.315% + resident tax 5%
Income + surtax 30.63% + resident tax 9%
For qualifying home sales
What is the difference between long-term and short-term?
Long-term vs short-term is judged not on the sale date but on whether ownership exceeds five years as of January 1 of the year of sale. For example, a property bought in June 2021 and sold in October 2026 had about 4.5 years of ownership on January 1, 2026, so it is short-term.
The rate is about 20% for long-term and about 40% for short-term. Shifting the sale by a few months can change the tax substantially, so check the holding period first when planning a sale.
Long-term vs short-term
| Category | How the period is judged | Approx. rate (incl. surtax) |
|---|---|---|
| Long-term | Over 5 years as of Jan 1 of the sale year | About 20.315% (income tax 15.315% + resident tax 5%) |
| Short-term | 5 years or less as of Jan 1 of the sale year | About 39.63% (income tax 30.63% + resident tax 9%) |
A worked example: sale price 50 million yen, acquisition cost (after depreciation) 35 million yen, transfer costs 2 million yen gives a gain of 13 million yen. Long-term is about 2.64 million yen and short-term about 5.15 million yen (13 million × 20.315% ≈ 2.641 million; 13 million × 39.63% ≈ 5.152 million).
Legal basis (Income Tax Act)
- Income Tax Act, Art. 33
- Defines capital gains and how they are calculated.
Legal basis (Special Taxation Measures Act)
- Special Taxation Measures Act, Art. 31
- Provides the long-term capital gains rate for land and buildings held more than five years.
- Same Act, Art. 32
- Provides the treatment of short-term capital gains for property held five years or less.
- Same Act, Art. 35
- Provides the 30 million yen special deduction for sales of a residence (with requirements).
When and how do you file?
If you sell at a gain, you generally file a tax return for the capital gain during the following year's filing season (roughly mid-February to mid-March). Prepare the sales contract, the original purchase contract, and brokerage receipts.
If the seller lives overseas (a non-resident), the buyer may withhold tax from the sale price. Treatment depends on the terms, so confirm with the agent or a tax accountant before contracting.
Common slips and fixes
✕Sold in a hurry and fell a few months short of five years, making it short-term.
→Check ownership as of January 1 of the sale year at the start of planning.
✕Discarded purchase documents and could not prove acquisition cost.
→Keep purchase papers until the sale; if lost, ask an accountant about the estimated cost.
✕Assumed the residence exemption applied to an investment property.
→Confirm eligibility with a professional before selling.
✕An overseas seller was unaware of withholding and received less than expected.
→Confirm withholding and refund possibilities at the terms stage.
Pre-sale tax checklist
- I confirmed ownership as of January 1 of the sale year
- I gathered the purchase contract and receipts
- I listed transfer costs such as brokerage fees
- I checked eligibility for the residence exemption
- I estimated the approximate tax
- I confirmed the filing season and required documents
- I checked how withholding works if I live overseas
FAQ
- Q. Do I need to file if I have a loss?
- A. Whether a loss can be offset against other income depends on the property type and requirements. Filing may be advantageous, so consult a tax accountant.
- Q. What is the holding period for inherited property?
- A. Generally the deceased's acquisition date is carried over when counting the period, but confirm the details individually.
- Q. When is resident tax paid?
- A. Based on your return, a resident tax notice generally arrives the following year.
- Q. Is the rate the same for foreign nationals?
- A. Treatment differs by resident or non-resident status rather than nationality. The rate logic is basically the same for the same holding period.
In the SUMIMOTO Hub app, AI valuation gives a sale price reference and the 24-hour AI advisor explains tax and procedure basics in multiple languages. Please confirm individual tax amounts with a qualified professional such as a tax accountant.
Questions about selling property in Japan and tax?
We will send a guide to the sales flow and key tax points.
Free, takes about a minute
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
Related Articles
Who Pays Property Tax in the Year You Buy? How the Pro-Rata Settlement Works for Resale Properties in Japan
Fixed asset tax is levied on whoever owns the property on January 1, so when you buy mid-year the seller and buyer normally split the tax by days. This article covers how the settlement works, a worked example, and what to check before signing.
Do You Need a Revenue Stamp on a Japanese Property Contract? Stamp Duty Amounts, Reductions and E-Contracts
Property sale contracts and mortgage agreements in Japan are subject to stamp duty. This guide covers typical amounts, the reduced rates said to apply to contracts made through March 2027, e-contracts, and the penalty for forgetting the stamp.
What Taxes Do You Pay Every Year After Buying Property in Japan?
Owning property in Japan means paying fixed asset tax every year, plus city planning tax in urbanization promotion areas. Tax is based on the assessed value set by the municipality, not the purchase price. Here are the rates, reliefs and who pays.
Another Tax Bill After Buying? How Japan's Real Estate Acquisition Tax Works
A few months after you buy property in Japan, a prefectural tax notice may arrive. Here is how the real estate acquisition tax works, how it is estimated, which housing reductions apply, and what overseas buyers should watch for.