Costs
Selling Tokyo Property Later: Costs, Capital Gains Tax and Non-Resident Withholding
Selling costs, how capital gains are calculated, the five-year rule, the 10.21% withholding on non-resident sellers and the Japanese tax return.
Thinking about the exit when you buy changes what you buy. Here are the costs and taxes of selling, with the steps that matter for owners who live abroad.
Key takeaways
- The gain is the sale price minus the acquisition cost and selling costs
- The holding period is judged on 1 January of the year of sale; over five years means a lower rate
- Buyers generally withhold 10.21% of the price when the seller is a non-resident
- You file a Japanese tax return the year after the sale, which settles the withheld tax
Selling costs
Not all of the sale price reaches you. The main costs are:
- Brokerage fee (maximum: price × 3% + ¥60,000 + consumption tax)
- Stamp duty on the sale contract
- Registration to release any mortgage, and early repayment fees
- Where needed, surveying, repairs and moving
Calculating the gain
The capital gain is the sale price minus the acquisition cost and the selling costs. The acquisition cost is the purchase price plus purchase costs, less depreciation on the building.
If you cannot document the acquisition cost, 5% of the sale price is used instead, which usually means much more tax. Keep your purchase documents.
Rates and the five-year rule
If you have owned the property for more than five years as of 1 January of the year you sell, the long-term rate of about 20.315% applies; otherwise the short-term rate of about 39.63% (both combine income tax, the reconstruction surtax and resident tax).
Resident tax is charged to people with an address in Japan on 1 January of the following year, so if you live abroad then, mainly the national part applies (15.315% long-term, 30.63% short-term).
Withholding on non-resident sellers
When the seller is a non-resident, the buyer generally withholds 10.21% of the price and pays it to the tax office. It does not apply when an individual buys a home for their own or a relative's use for ¥100 million or less.
The withheld tax is settled in your tax return the following year, and any overpayment is refunded. Without an address in Japan, you file through a tax representative.
What to plan when you buy
With the exit in mind, keep these in view from the start.
- Keep the contract and receipts that prove your acquisition cost
- Note when you pass five years of ownership (judged on 1 January of the year of sale)
- Watch for conditions that make resale harder: old earthquake standard, leasehold, no rebuilding
- Decide whether you will sell with a tenant or vacant
FAQ
Is tax lower if I lived in the home?
Selling your own home can qualify for reliefs such as a ¥30 million special deduction, subject to conditions. Investment property you did not live in does not qualify.
Do I need to file if I sell at a loss?
No tax is due, but you need to file to recover any tax that was withheld.
Who can calculate the tax?
A Japanese tax accountant usually handles it. We are also happy to discuss selling with you.
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