Property Taxes in Japan - Explaining Fixed Asset Tax and City Planning Tax for Non-Japanese

Poste date: Monday, February 5, 2018

When you own real estate in Japan, a Fixed Asset Tax and City Planning Tax are imposed yearly. These taxes are due regardless if the owner is an individual or a corporation. A notification of the tax due is sent to the owner of the property as of the 1st of January every year.

We would like to explain below what each tax is all about and what amount to expect. We here also provide the guidance of how a non-resident can pay the Fixed Asset Tax and City Planning Tax.

What is Fixed Asset Tax?

It is a tax that is calculated based on the price of fixed assets such as land, a house, and depreciable assets.

Taxable property :

All land and houses

Taxpayer :

An owner of land, a house, and depreciable assets as of January 1st every year

Tax collector :

Cities, towns, and villages (within Tokyo’s 23 wards by the Tokyo Metropolitan Government)

Tax Rate :

1.4% x Assessed Value of fixed assets

What is City Planning Tax?

It is a tax to be levied as objective tax to allot for expenses required for city planning projects or land readjustment projects.

Taxable property :

The land and building located within an urbanization promotion area designated in the City Planning Act

Taxpayer :

An owner of land, a house, and depreciable assets as of January 1st every year

Tax collector :

Cities, towns, and villages (in Tokyo’s 23 wards by the Tokyo Metropolitan Government)

Tax Rate :

0.3% x Assessed Value of fixed assets (Maximum)

*e.g. in 2016 for Tokyo’s 23wards: 0.3%, Fuchu-city, Tama-city: 0.2%

Actual tax rate applied differs per each municipality

The Owner as of January 1st every year is the Taxpayer for 1 year

The taxpayer of Fixed Asset Tax and City Planning Tax is the owner of a real estate property as of January 1st of the year to be levied. When there is a business transaction to change the owner of the property in the middle of a year, usually the seller and buyer divide the taxable amount proportionally by the day.

Case of Land for residence

Small Residential Land: Area less than 200 sq.m per 1 house
Fixed Asset Tax Assessed Value of fixed assets X 1/6
City Planning Tax Assessed Value of fixed assets X 1/3
General Residential Land:Land area over 200 sq.m and less than 10 times the gross floor area of a house
Fixed Asset Tax Assessed Value of fixed assets X 1/3
City Planning Tax Assessed Value of fixed assets X 2/3

Case of Newly Built House

For a new house built by March 2018 and that satisfies the following requirements, a tax levied on a residential space up to 120 sq.m (taxable floor area) is reduced to 1/2 for a fixed period of time.

  • * Fire-resistant buildings and semi-fire-resistant buildings higher than 3 stories such as apartments -> Taxable amount for 5 years
  • * Residential houses other than the above -> Taxable amount for 3 years
  • * Taxable floor area of residential space per house is over 50sq.m and less than 280sq.m

The reducing measures are applicable only for the residential space

When a residential space is over 120sq.m, the reducing measures are applicable only up to 120sq.m.

Tax reducing measures are also applicable for the following cases when they meet certain requirements:

  • * A building authenticated as a long-life quality housing
  • * When building a new house with increased earthquake-resistant function
  • * When doing renovation work for improving earthquake-resistance
  • * When doing renovation work for barrier-free space
  • * When doing renovation work for energy conservation

How to pay tax

A tax notice is sent from your municipality (in Tokyo 23 wards from the Tokyo Metropolitan Government).

Tax is due 4 times a year. The tax payment can be done quarterly or all at once at the first deadline. The deadline differs per each municipality. The deadlines for Tokyo in 2016 are as follows:

1st deadline: June 30, 2016

2nd deadline: September 30, 2016

3rd deadline: December 27, 2016

4th deadline: February 28, 2017

Delinquent charge is accrued when the tax payment is overdue.

The method of payment depends on each municipality but is described on the tax notice. It can be paid at a bank, a post office, other financial institution, or a convenient store which is designated in the tax notice.

For Non-Japanese Nationals and Non-residents

Fixed Asset Tax and City Planning Tax are imposed when you retain a real estate property regardless of your residence status.

A foreigner living outside of Japan also has the obligation to pay tax like a domestic resident.

When you cannot pay tax by yourself, you are required preliminarily to ask someone on your behalf who lives in Japan. This person responsible for paying tax is called a Tax Agent. When you have decided on your Tax Agent, you need to submit a “Notification of Tax Agent” to the local tax office which has jurisdiction over your real estate property.

Document Form >> https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/pdf/h28/08.pdf

After the form is submitted, the notice of Fixed Asset Tax and City Planning Tax is mailed to the Tax Agent.

Non-Japanese Nationals who have purchased real estate properties for investment purposes and live outside of Japan, in many cases, may ask English speaking Japanese accounting offices and tax accountant corporations for paying taxes. In this case you can ask them to pay not only Fixed Asset Tax and City Planning Tax but also to file an income tax return of the rent income from your real estate property.

For further details please see the website page of The Tokyo Metropolitan Government Bureau of Taxation: http://www.tax.metro.tokyo.jp/shisan/kotei_tosi.html

Website in English of The Tokyo Metropolitan Government Bureau of Taxation:

http://www.tax.metro.tokyo.jp/english/type_tax.html

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