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Should I buy a property before the consumption tax increases?

Post: Thursday August 9, 2012



If consumption tax increases, how much more will you need to purchase your own home?  We’ll talk about the consumption tax increase when purchasing a house here.

First of all, there will be no consumption tax imposed to purchase a piece of land.
For example, when one purchases a detached house for 60 million yen; which is broken down to 40 million yen for the land and 20 million yen for the house.  In this case, consumption tax is imposed only on 20 million yen for the house.  When the consumption tax rate is 5%, the amount of consumption tax imposed is one million yen.  If the tax rates goes up to 10%, you will need another million yen to pay for two million yen consumption tax in total.


When one is purchasing an apartment unit, he will get a right to use the condominium site in addition to the ownership of the condominium unit.  The right to use the condominium site is considered equally as ownership of the land for detached house; which means no consumption tax will be imposed.  Only the price of the ownership of the condominium unit will be taxed.


Further, consumption tax is often not imposed when purchasing an existing property.  Since consumption tax arises when a business operator offers services or goods, it doesn’t apply to any business between individual persons, except for the cases when individual person conducts a real estate business.  The business is considered as “personal trading” when one purchases a property from an individual owner, no consumption tax will be imposed on either land or building.  It is advisable to check who is the owner of the property you’re interested.  Having said that, it is more common to purchase an existing property through a real estate agent. In such case, the commission will be taxed as a service provided by an agent while no consumption tax is imposed on the property or land.


*Examples of buying costs of a house and an apartment  are also explained on our website.

This entry was posted in Real Estate News, Tax & Necessary Expenses, Tips for chossing a property


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