Tax and Selling Costs

Taxes and Selling Costs for Foreigners Selling Property in Japan

When a foreigner sells property in Japan, the process is similar to that for Japanese owners.
However, there are specific tax obligations and selling costs you need to understand.
Here is a simple guide.

1. Taxes When Selling Property in Japan

Capital Gains Tax (譲渡所得税)
If you sell a property for more than you originally paid (including purchase costs), the profitis called capital gain (譲渡所得).
Capital Gain = Selling Price - (Purchase Price + Purchase Costs + Selling Costs)
This gain is subject to capital gains tax, which consists of:

• National Income Tax
• Local Inhabitant Tax
• Special Reconstruction Tax (2.1% surcharge)

Tax rate depends on how long you owned the property:

• Short-term ownership (5 years or less) → approx. 39.63%
• Long-term ownership (more than 5 years) → approx. 20.315%

If you are a non-resident, the same tax rates apply, but the tax will be withheld by the buyer and paid directly to the tax office.

Filing a Tax Return

• If you are a resident in Japan, you must file a tax return the following year to declare your gain.
• If you are a non-resident, the buyer's side will handle the 10.21% withholding tax at settlement. If the actual tax should be lower (e.g., due to deductible costs), you can file a return to claim a refund.

2. Selling Costs

When selling property in Japan, you will also have some direct costs:

1. Real Estate Agent Commission
   o Standard rate: 3% of the selling price + 60,000 yen + tax
   o Example: If you sell for 30,000,000 yen, the commission is ～1,056,000 yen including tax
2. Judicial Scrivener Fee
   o If you still have a mortgage, you need to cancel the registration.
   o Approx. 30,000-50,000 yen
3. Remaining Loan Repayment (if applicable)
   o If there is an existing mortgage, it must be paid off at settlement.
4. Staging or Minor Repairs (Optional)
   o If you want to improve the property's appeal before selling.
5. Other Costs
   o Certificate issuance fees, moving costs, etc.

3. Withholding Tax for Non-Residents

If you are a non-resident seller, Japanese law requires the buyer to withhold 10.21% of the selling price and pay it to the tax office on your behalf.

• This is NOT the final tax amount. It's a temporary withholding.
• If your actual capital gain is smaller, you can file a tax return to claim a refund.

Example:

• Selling price: 50,000,000 yen
• Buyer must withhold: 5,105,000 yen
• If your actual gain is only 2,000,000 yen, the correct tax may be much lower, so you can claim back the difference.

4. After-Sale Tax Support

For foreigners, especially non-residents, it's recommended to use:

• A tax accountant to calculate your deductible expenses and handle refund claims.
• A real estate agent who can coordinate with the buyer, judicial scrivener, and tax office.

Quick Summary

• Capital Gains Tax: 20% (long-term) or 39% (short-term)
• Selling Costs: Agent commission (~3%), judicial scrivener fee, possible loan repayment
• Non-residents: Buyer withholds 10.21% of the sale price, but you can get a refund if overpaid
• Recommendation: Hire a professional tax accountant for accurate calculation and refund claims