If you currently own property in Japan, you should be receiving your annual property tax bill this month or next. These taxes are owed by anyone who owns real estate in Japan, be it residential, commercial or otherwise. Those living overseas are taxed the same as those living in the country.
Tax bills are usually sent out around April or May each year, depending on the city, and are paid to the city where the property is located.
The tax is broken up into two sections:
- Fixed asset tax: 1.4% of the taxable value
- City planning tax: 0.3% of the taxable value
The taxable value of the property is not the market value. In many cases it is a lot lower. However, it is tied to changes in property values, so the taxable value may rise if the property market is improving. The amount is adjusted every three years, with the next adjustment due in 2021. Any large jumps in property values are usually offset with a special reduction to reduce any immediate impact on the property owner.
The taxes are usually halved for the first three to five years after the construction of a new home or apartment, so be aware of the potential for your tax bill to increase if you have purchased a new or near-new home.
Before buying property, find out what the most recent tax bill was so you have an idea of what to expect as the next owner.
Paying the tax
You will receive a letter from the city government with the tax payment slips. You can either pay the annual amount in one lump sum, or pay it in four installments. The deadline for the lump sum or first payment is typically in early May. Penalties apply for late payment.
Payment instructions are included with the tax slips. Payment options can include paying at a bank branch, at a convenience store*, or using a credit card on the city tax payment website*.
If you live overseas, your tax bill will be sent to the tax agent you have appointed. Haven’t appointed a proxy? It’s essential that you do so as soon as possible. It can be a friend, accounting firm or property management firm. We provide our buyers with referrals to tax agents before they make a purchase, to ensure they do not run the risk of having their home seized by the local government for non-payment of taxes.
The tax bill is sent to the owner of the property as at January 1 of each year. If you sold your property on January 5, for example, the tax bill for that year will still be sent to you and you will be liable for payment, even though you are not the current owner. To remedy this, the custom at the time of sale is for the buyer to pay the seller a pro-rated amount based on the previous year’s or current year’s tax at the time of sale.
If you have made changes to your property, eg. you have converted a retail space into a house, a house into a minpaku-style accommodation property, or made extensions, the tax may change accordingly. You need to inform the city tax department to have a re-assessment made on the property.
*Not possible for tax payments exceeding 300,000 Yen.