The Tokyo Metropolitan Government assessed fixed asset tax values for 2026 on January 1, applying depreciation schedules that reduce building assessments by structure type while land values in Minato-ku and Shibuya-ku continued their sixth consecutive year of increases. For foreign buyers holding or considering Tokyo real estate, the mechanics of depreciation operate differently than in North American or European markets, with distinct rules for fixed asset taxation, income tax deductions, and, as of the 2026 tax reform outline, inheritance tax valuation of rental properties acquired within a five-year window.

How Fixed Asset Tax Depreciation Works for Tokyo Buildings

Fixed asset tax (固定資産税, kotei-shisan-zei) applies to land, buildings (家屋, kaoku), and depreciable assets (償却資産, shoukyaku-shisan) owned as of January 1 each year. The standard rate is 1.4% of assessed value under the Local Tax Act (地方税法第341条). In designated urban planning areas, an additional urban planning tax (都市計画税, toshi-keikaku-zei) of up to 0.3% applies.

Building assessments use the replacement cost method (再調達価格原価法) with depreciation adjustments (減価修正). The Tokyo Metropolitan Government and the National Tax Agency publish annual valuation standards that determine how much a building’s assessed value declines each year based on its structure and age.

The critical distinction for foreign owners: fixed asset tax depreciation curves differ from income tax depreciation schedules. A reinforced concrete building in Azabu (麻布) assessed at ¥150 million for fixed asset tax purposes may have a book value of ¥120 million for corporate income tax purposes, depending on acquisition date and depreciation method elected. These parallel systems do not reconcile, and each serves different administrative purposes.

For personal residences, the residential land tax reduction (住宅用地の特例) significantly mitigates fixed asset tax exposure. Small-scale residential land of 200 square meters or less per unit is assessed at one-sixth of value for fixed asset tax and one-third for urban planning tax. General residential land exceeding 200 square meters receives one-third and two-thirds reductions respectively. Foreign buyers qualify for these reductions on the same terms as Japanese nationals, provided the property serves as their primary residence. Filing deadlines are strict: January 31 of the year following any status change, including new construction, demolition, or use conversion.

Statutory Useful Life Tables: From Wood to Steel-Reinforced Concrete

Statutory useful life (耐用年数, taiyou-nensuu) determines depreciation periods for income tax and corporate tax purposes. These periods are fixed by ministerial ordinance and do not vary by building condition or location.

Structure	Statutory Useful Life	Common Applications
Wooden (木造, mokuzou)	22 years	Traditional houses, low-rise apartments
Steel frame (鉄骨造, tekotsu-zou)	19–34 years	Varies by thickness of steel members
Reinforced concrete (鉄筋コンクリート造, tekkin-concrete-zou)	47 years	Standard condominiums, office buildings
Steel-reinforced concrete (鉄骨鉄筋コンクリート造, tekotsu-tekkin-concrete-zou)	47 years	High-rise towers, luxury developments

The 47-year statutory life for reinforced concrete structures has remained unchanged since 1998. In practice, well-maintained buildings in central Tokyo often command market values well beyond this depreciation horizon, particularly in supply-constrained districts like Hiroo (広尾) and Shirokane (白金). The depreciation schedule assumes straight-line decline to 10% of acquisition cost, after which a nominal ¥1 book value is maintained.

For fixed asset tax purposes, depreciation accelerates more rapidly in early years. A new reinforced concrete building loses approximately 8–10% of assessed value in its first decade, with the rate slowing thereafter. By year 47, fixed asset tax assessment typically reaches 20–25% of original construction cost, compared to 10% for income tax book value.

Foreign investors should note that Japan property tax obligations for foreigners include not only fixed asset tax but also income tax on rental yields and eventual capital gains tax on disposition. The depreciation taken for income tax purposes reduces the cost basis for capital gains calculation, creating a recapture effect that differs from the United States Section 1250 regime. Japan applies ordinary income tax rates to all depreciation recapture, with no preferential rate cap.

2026 Tax Reform: New Rental Property Valuation Rules Explained

The 2026 Tax Reform Outline (令和8年度税制改正大綱), published December 2025 and effective for inheritances and gifts occurring on or after January 1, 2027, fundamentally alters valuation methodology for certain rental properties.

Under current rules, rental properties are assessed for inheritance tax using the route value method (路線価方式), which applies standardized per-square-meter valuations to land and depreciated replacement cost to buildings. This system often produces assessed values 30–50% below market transaction prices in prime Tokyo districts.

The 2026 reform introduces market value assessment (時価評価) for rental properties (貸付用不動産, kashitsuke-you-fudousan) acquired within five years before inheritance (相続開始前5年以内に取得). The new rules apply as follows:

Scenario	Assessment Method	Effective Rate vs. Market
Standard: property acquired 5+ years before inheritance	Route value method	Typically 30–50% of market
New rule: property acquired within 5 years	80% of acquisition cost	Approximately 70–85% of market
Anti-abuse: tax avoidance structures deemed	100% market value	Full market value

The 80% of acquisition cost standard replaces the route value method for targeted properties. For a ¥500 million rental tower in Minato-ku (港区) acquired in 2024 and inherited in 2027, the taxable base would be ¥400 million under the new rules, versus approximately ¥250 million under the route value method that would have applied to a 2019 acquisition.

Two exemptions preserve route value treatment: land owned for five or more years with new construction erected on it, and properties acquired before the five-year lookback period. The transitional protection means inheritances occurring in calendar 2026 retain route value assessment regardless of acquisition date.

The 5-Year Lookback: When Market Value Replaces Route Value

The five-year lookback period (5年ルックバック) creates a sharp planning boundary for foreign investors considering Tokyo rental property as part of cross-border wealth structures.

Properties purchased in 2022, 2023, or 2024 and inherited before January 1, 2027, receive route value assessment. The same properties inherited on or after that date face the new 80% of cost standard, with potential additional adjustments if tax authorities determine artificial structuring.

For fractional properties (小口化不動産, koguchi-ka-fudousan) and trust beneficiary rights (信託受益権, shintaku-jueki-ken), the reform eliminates the route value method almost entirely. These instruments will be assessed at market value regardless of holding period, closing a structuring channel that had allowed valuation discounts through 5–10 year holding periods.

The policy intent targets what the National Tax Agency terms “rush acquisitions” (急いで取得) of rental properties by individuals anticipating inheritance. The 2022–2023 period saw elevated foreign acquisition of small-scale rental properties in Tokyo 23 wards, partly in anticipation of yen depreciation and partly for inheritance tax positioning. Those acquisitions are grandfathered if inheritance occurs in 2026, but exposed to higher valuations if the owner survives into 2027.

Residential Land Tax Reductions for Foreign Buyers

Foreign nationals holding Tokyo real estate for personal residence, whether on work visas, investor visas, or permanent residency (永住権, eijuuken), qualify for the same residential land tax reductions as Japanese citizens. The reductions apply automatically upon proper filing, but the filing obligation rests with the owner.

For a typical 150-square-meter detached house in Setagaya-ku purchased for ¥180 million (land ¥120 million, building ¥60 million), the 2026 fixed asset tax calculation would be:

• Land: ¥120 million × 1/6 × 1.4% = ¥280,000
• Building (year 3, reinforced concrete): ¥60 million × 0.92 depreciation factor × 1.4% = ¥773,000
• Total before reductions: ¥1,053,000
• Total with residential reductions: ¥1,053,000 (building ineligible; land reduction already applied)

The building portion receives no residential reduction; only land benefits. For condominium owners, the land share is prorated by unit ownership percentage (専有面積割合, senyu-menseki-wariai).

Urban planning tax, where applicable, follows parallel reduction schedules. In designated urban planning areas covering most of Minato-ku, Shibuya-ku, and Chiyoda-ku (千代田区), the 0.3% maximum rate applies to the reduced base.

Foreign buyers should verify their Japan flat prices and ongoing ownership costs include not only acquisition taxes but also the recurring fixed asset tax burden, which typically runs 0.3–0.8% of market value annually for residential properties after reductions.

Depreciable Assets Beyond the Building Structure

Fixed asset tax applies not only to land and buildings but to depreciable assets (償却資産) attached to or used in connection with real estate. For luxury Tokyo properties, this category can include:

• Elevator equipment and control systems
• Emergency generators and backup power
• Smart home infrastructure and building automation
• Solar panel installations (owned, not leased)
• Parking mechanical systems

Items under ¥100,000 acquisition cost, assets with useful life under one year, intangible assets such as goodwill, and vehicles subject to automobile tax are excluded from depreciable asset taxation.

The assessment base for depreciable assets is acquisition cost minus accumulated depreciation under statutory schedules, distinct from both fixed asset tax building depreciation and income tax depreciation. The Tokyo Metropolitan Government requires annual filing for depreciable assets, with assessments finalized by January 1 each year.

For high-net-worth buyers of premium developments in Azabudai Hills or Roppongi Hills, equipment-heavy specifications may trigger five- to seven-figure annual depreciable asset tax liabilities separate from the building assessment. These costs are typically passed through to owners via management fees (管理費, kanri-hi) in condominium structures, but warrant verification in purchase due diligence.

Payment Deadlines and Compliance Calendar for 2026

Fixed asset tax for 2026 is assessed on January 1, 2026 ownership, with payment obligations following the Tokyo 23 wards schedule:

Installment	Coverage Period	Due Date
1st	April 2026 – July 2026	June 30, 2026
2nd	August 2026 – October 2026	September 30, 2026
3rd	November 2026 – January 2027	January 5, 2027
4th	February 2027 – March 2027	March 2, 2027

Payment notices arrive in April for the full year, with installment options available. Foreign owners without Japanese bank accounts may pay at convenience stores, post offices, or through designated bank transfers. Late payment incurs penalties of 7.3% annually for the first month, 14.6% thereafter.

For the 2026 tax reform transition, calendar-year planning is critical. Inheritances completed by December 31, 2026, retain route value assessment for rental properties regardless of acquisition date. Gifts (贈与, zouyo) structured in 2026 similarly avoid the new market value standards. The one-year window creates urgency for owners of 2022–2024 acquisitions to review estate structures.

The National Tax Agency and Tokyo Metropolitan Government maintain English guidance on their websites, but statutory notices and assessment documents are issued in Japanese only. For complex holdings involving multiple properties, fractional structures, or cross-border trust arrangements, professional coordination between Japanese tax counsel and home-country advisors is essential.

Koukyuu is a private buyer’s advisory for distinguished Tokyo residences in Minato-ku, Shibuya-ku, and Chiyoda-ku, focused exclusively on transactions of ¥300 million and above. A licensed 宅建士 (takken-shi, Japan’s licensed 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. Book a private consultation).