Sellers who are non-residents (eg. foreigners living abroad and Japanese citizens living abroad).
Buyers, both local and overseas residents, who are buying real estate in Japan from a non-resident.
If the seller of Japanese real estate is a non-resident, depending on the situation, the buyer must withhold 10.21% of the sale price and pay it to the tax office, with the remaining 89.79% paid to the seller. The buyer is responsible for paying the 10.21% to the tax office by the 10th of the month following the transaction.
As part of a plan to support and boost the market for used homes, the Japanese government is considering introducing measures to encourage lower interest rates on mortgages that include a component for renovations as well as tax benefits for buyers of older homes.
Although there is growing demand from consumers for relatively cheaper existing homes, more than half require some form of work such as earthquake-retrofitting or upgrades to make them barrier-free for older occupants. It is hoped that easier financing will encourage more consumers to consider older homes and reduce the number of vacant homes across the country.
Expanding the Flat 35 Home Loan
The Japan Housing Finance Agency’s ‘Flat 35’ home loan offers interest rates from as low as 1.69%. Although the loan can be used for both new and old properties, it may soon be expanded to provide additional financing for renovation costs at the time of purchase.
Home owners are likely to see their annual fixed asset and city taxes increase in 2015. The Ministry of Internal Affairs and Communications has decided that residential buildings will be valued at a higher rate next year to account to reflect the recent increase in construction and labour costs. This will be the first increase in the taxable value since 2009.
Toshima-ku in Tokyo announced that they will extend the special tax on builders of studio or ‘one-room’ apartments for another five years.
The tax applies to buildings with 9 or more apartments that are less than 30 sqm (323 sqft) in size. A construction company must pay a tax of 500,000 Yen on each studio apartment within two months of the commencement of construction.
The government is considering extending the fixed asset tax reduction on new homes for another two years. Currently, the annual fixed asset taxes are halved for the first 3 ~ 5 years on new homes and apartments. Unless extended, the special tax relief measure is set to expire at the end of March 2014.
There are concerns about a slump in new home sales following the planned increase in consumption tax from April 2014. As a result, the government is looking at measures to counter-act any possible downturn in sales activity.
Japan’s National Tax Agency has discovered that 10 Australians have neglected to pay capital gains tax on the sale of real estate in Hokkaido’s Niseko area. Approximately 56 million Yen (570,000 USD) in tax is owed, with an additional 14 million Yen (140,000 USD) in penalties.
The popular beachside resort area of Atami in Shizuoka levies a special tax on owners of holiday homes and resort apartments within the city. Called a “besso” tax (besso = holiday house), it is very similar to a municipal tax. This tax is only charged on properties in Atami City, and is not found anywhere else in Shizuoka Prefecture.
There has been recent movement to increase the inheritance taxes and reduce the tax deductions as a way to distribute wealth. Osaka Mayor Toru Hashimoto has even suggested collecting the entire inheritance so that no wealth is passed onto the next generation.
The revision to the inheritance taxes in Japan was scheduled to go in effect from April 2011, but was delayed due to the Tohoku disaster. The current economic climate suggests that taxes will be increased, and the terms of the increases may be decided this year.
The Government’s Select Committee on the Taxation System has decided to extend the fixed asset tax reduction that applies to brand new homes and apartments. The reduced tax benefit will be extended an additional two years. Under this new plan, the annual fixed asset tax on a brand new apartment or home will be halved for the first five years since construction. The tax applies to all new residences, including those purchased to be rented out as an investment.