Foreign buyers acquired ¥847 billion worth of Tokyo residential real estate in 2025, according to Ministry of Land, Infrastructure, Transport and Tourism data released in March 2026. Each transaction carried a tax burden distinct from the purchase price itself: acquisition taxes payable within 60 days, annual property taxes billed in June, and capital gains taxes triggered on eventual sale. Understanding the structure, timing, and calculation method for each levy is essential for accurate budgeting and compliance.

Acquisition Tax: One-Time Levy at Purchase

The 不動産取得税 (fudousan-shutoku-zei, real estate acquisition tax) applies to all buyers, regardless of residency status, when legal title transfers. As of April 2026, the standard rate is 3% of the assessed value for residential land and buildings. Assessed value is determined by the 固定資産税評価額 (kotei-shisan-zei-hyouka-gaku, fixed asset tax assessment), typically 60% to 70% of market price.

For a ¥400 million condominium in Azabu (麻布) with an assessed value of ¥280 million, acquisition tax totals ¥8.4 million. The Tokyo Metropolitan Tax Office issues a payment notice approximately four to six months after the 登記 (touki, transfer of legal title recorded at the Legal Affairs Bureau). Payment is due within 30 days of the notice date. Certain exemptions apply: properties with floor area below 50 square meters or land parcels under specific thresholds may qualify for reduced rates, though most transactions above ¥300 million exceed these limits.

Registration and license tax, a separate national levy, adds another 2% of the assessed value for ownership transfer and 0.4% for mortgage registration if financing is involved. Combined, upfront taxes typically reach 3% to 4% of the purchase price. Buying Property in Japan as a Foreigner: Complete Guide 2026 covers the full acquisition timeline and documentation requirements.

Annual Property Tax: June Billing Cycle

The 固定資産税 (kotei-shisan-zei, fixed asset tax) is an annual municipal tax levied on all real estate owners as of January 1 each year. The standard rate in Tokyo’s 23 wards is 1.4% of the assessed value. An additional 都市計画税 (toshi-keikaku-zei, city planning tax) of 0.3% applies in urbanized zones, bringing the combined rate to 1.7%.

For a property with an assessed value of ¥280 million, annual property tax totals ¥4.76 million. The Tokyo Metropolitan Government mails payment notices in June, with four installment options: full payment in June, or quarterly payments in June, September, December, and February. Non-resident owners may authorize a Japanese bank account for automatic debit or appoint a tax agent to handle payments.

Assessed values are recalculated every three years. The most recent revaluation occurred in April 2024, with the next scheduled for April 2027. Property tax bills for 2026 reflect the 2024 assessment. Residential land benefits from a statutory reduction: land up to 200 square meters is assessed at one-sixth of the standard valuation, and land between 200 and 400 square meters at one-third. Buildings over 30 years old may see gradual increases as depreciation tapers. Property tax Japan rates and fees: 2026 complete guide provides neighborhood-specific examples and payment methods.

Capital Gains Tax: Short-Term vs Long-Term Holding

Profit from the sale of Japanese real estate is subject to 譲渡所得税 (joto-shotoku-zei, capital gains tax), calculated separately from other income. The rate depends on the holding period, measured from January 1 of the acquisition year to January 1 of the sale year.

Short-term capital gains, for properties held five years or less, are taxed at 39.63%: 30% national income tax, 9% local inhabitant tax, and 0.63% reconstruction surtax. Long-term capital gains, for properties held more than five years, are taxed at 20.315%: 15% national income tax, 5% local inhabitant tax, and 0.315% reconstruction surtax.

A buyer who acquires a ¥400 million property in Hiroo (広尾) in March 2026 and sells it in April 2031 for ¥450 million realizes a ¥50 million gain. After deducting acquisition costs (approximately ¥16 million in taxes and fees) and any capital improvements, the taxable gain might be ¥34 million. Long-term capital gains tax on that amount totals approximately ¥6.9 million. If the same property sold in April 2030, the gain would be taxed at the short-term rate of 39.63%, resulting in a tax bill of approximately ¥13.5 million.

Non-residents face an additional withholding requirement: the buyer must withhold 10.21% of the gross sale price and remit it to the National Tax Agency within 10 days of the transaction. The seller then files a final return to reconcile the withholding against the actual capital gains liability. The FY2026 Tax Reform proposals released in December 2025 did not alter capital gains rates for real estate, maintaining the structure in place since 2013.

Inheritance and Gift Tax: Cross-Border Considerations

Japan’s 相続税 (sozoku-zei, inheritance tax) applies to estates exceeding ¥30 million plus ¥6 million per heir. For a single heir, the basic exemption is ¥36 million. Estates above that threshold are taxed on a progressive scale, reaching 55% for amounts over ¥600 million.

Foreign nationals with 永住権 (eijuuken, Japanese permanent residency) or those who have lived in Japan for more than 10 of the past 15 years are subject to Japanese inheritance tax on worldwide assets. Non-residents are taxed only on Japanese real estate. As of January 1, 2024, the look-back period for non-resident heirs was reduced from 10 years to three years, a change that remains in effect through April 2026.

A non-resident heir inheriting a ¥400 million Tokyo property with no other Japanese assets would face inheritance tax calculated on the full property value, less the ¥36 million exemption, resulting in a liability of approximately ¥70 million under the current progressive brackets. Gift tax follows a similar structure, with an annual exemption of ¥1.1 million per recipient. Transfers above that threshold are taxed at rates ranging from 10% to 55%.

Estate planning for foreign owners often involves establishing a Japanese corporation to hold the property, converting the inheritance from real estate to corporate shares, which may be subject to the tax laws of the owner’s home jurisdiction. The National Tax Agency’s English-language guidance on inheritance tax provides case-specific examples and filing deadlines.

Mortgage Interest Deduction: Eligibility for Foreign Buyers

The 住宅ローン控除 (jutaku-ron-koujo, mortgage tax deduction) allows owner-occupiers to deduct 0.7% of the outstanding loan balance from their annual income tax liability for up to 13 years. The maximum deductible loan balance for newly built properties certified as energy-efficient is ¥50 million, yielding a maximum annual deduction of ¥350,000.

Eligibility requires the buyer to be a Japanese tax resident, defined as maintaining a 住所 (jusho, primary domicile) in Japan. Foreign nationals on work visas, spouse visas, or permanent residency qualify if they file a Japanese tax return and occupy the property as their primary residence within six months of purchase. Non-residents and buyers purchasing investment properties do not qualify.

A foreign buyer financing a ¥300 million purchase in Shirokane (白金) with a ¥200 million mortgage at 1.5% over 30 years can claim a deduction of ¥1.4 million in the first year, reducing their income tax bill by that amount. The deduction phases out as the loan balance declines. The 2026 tax year, covering income earned from January 1 to December 31, 2026, is the final year for properties purchased before December 31, 2025, to qualify for the full 13-year term. Properties purchased in 2026 qualify for a 10-year term unless they meet enhanced energy standards.

Consumption Tax: New Construction and Commercial Transactions

Japan’s 消費税 (shohi-zei, consumption tax) stands at 10% as of April 2026. The tax applies to the building portion of new construction sales and to the full price of commercial real estate transactions. It does not apply to the land component of residential purchases or to resale transactions between individuals.

A buyer acquiring a newly built condominium in Minato-ku (港区) for ¥500 million, with ¥100 million allocated to land and ¥400 million to the building, pays ¥40 million in consumption tax on the building portion. The tax is included in the contract price and paid to the seller, who remits it to the National Tax Agency. Resale transactions, which constitute the majority of purchases above ¥300 million in central Tokyo, are exempt from consumption tax on both land and building.

Foreign buyers purchasing through a Japanese corporation may be able to reclaim consumption tax if the corporation engages in taxable business activities, such as leasing the property commercially. Individual buyers occupying the property as a residence cannot reclaim the tax. Freehold vs Leasehold Japan Real Estate: Complete Guide 2026 explains the structural differences that affect tax treatment.

Filing and Compliance: Deadlines and Documentation

Non-resident property owners must file a Japanese tax return if they earn rental income or sell property during the calendar year. The filing deadline is March 15 of the following year. Returns are submitted to the tax office with jurisdiction over the property’s location. English-language forms are available for income tax returns, though supporting documentation must be translated into Japanese.

A non-resident owner earning ¥12 million in annual rental income from a Tokyo property deducts expenses such as management fees, property tax, and depreciation, then pays income tax at a flat rate of 20.42% on the net income. Depreciation is calculated over 47 years for reinforced concrete buildings and 22 years for wooden structures. Failure to file results in penalties of 15% to 20% of the unpaid tax, plus interest accruing at 2.4% annually.

Resident owners consolidate real estate income with employment and other income on their annual return, taxed at progressive rates from 5% to 45%. Appointing a 税理士 (zeirishi, licensed tax accountant) is common practice for foreign buyers, particularly those managing multiple properties or navigating cross-border tax treaties. Japan maintains tax treaties with 76 countries as of April 2026, many of which provide relief from double taxation on real estate income and capital gains.

Koukyuu is a private buyer’s advisory for distinguished Tokyo residences in Roppongi Hills, Azabudai Hills, and Kita-Aoyama, focused exclusively on transactions of ¥300 million and above. A licensed 宅建士 (takken-shi, Japan’s statutory real estate transaction specialist) personally handles every stage of the engagement, from the first consultation to the signing, a continuity most Tokyo agencies do not offer. Begin a private conversation) to discuss your Tokyo acquisition.