To acquire a property in Japan, there are various costs must be borne by the buyer. These costs are varying with the type, scale and built age of the property, as well as the payment settlement methods, etc. These fees can be divided into two categories: one is tax fees required by the government and the other is handling fee payable to related parties such as the property agent or the judicial scrivener involved. It has been roughly estimated that these costs might be around 6-10% of the price of a second-hand property.
Basically, the taxes involved in property transaction include consumption tax, stamp tax, real estate acquisition tax, registration and license tax as well as city planning tax and fixed asset tax. Let`s discuss further the details of these taxes.
What is “CONSUMPTION TAX”?
Consumption tax is a national tax levied by the government on domestic transactions which subject to consumption tax include the transfer or rental of assets or the provision of services as a business in Japan by an enterprise. The current tax rate is 10%. Although most of the property prices are shown with tax included, there are some shown without tax prices and therefore it is vital to double check if the display price of the property is tax included or excluded.
What is “STAMP TAX”
According to the Stamp Duty Act in Japan, if the prepared documents are to show the “taxable subject” specified in Stamp Duty Act, specific amount of stamp must be affixed on the original copy of the document. These documents include sales contract of real property, loan agreement, service contract and receipt slip, etc. The amount of stamp tax varies with the amount stated on the documents. For example, the stamp tax for a property contract with price between 50 million ~ 100 million is 30,000 yen.
What is “REAL ESTATE ACQUISITION TAX”?
Real estate acquisition tax is the tax imposed on the person who has acquired a real estate and this tax is levied whenever there is a transfer of ownership of the property. The tax base is the assessed value of the real estate listed on the official ledger instead of its selling price. “Assessed value” is a value used for the calculation of real estate acquisition tax, fixed asset tax and city planning tax as well as registration and license tax. The assessed value is listed on the property tax ledger in the local government office. Currently, the tax rate is 3% on land and dwellings and 4% on buildings other than dwellings.
What is “REGISTRATION and LICENSE TAX”?
Registration and license taxes are imposed mainly for registration of preservation and relocation of ownership. It is important for the buyer to register the ownership of the property when acquiring a property to enforce the right of property ownership. The tax base is the assessed value of property.
What is “CITY PLANNING TAX & FIXED ASSET TAX”?
Fixed asset tax is calculated based on the assessed value of fixed assets such as land, a house, and depreciable assets. City planning tax is a tax to be levied as objective tax to allot for expenses required for city planning projects or land readjustment projects. These two taxes are levied at the same time on the first of January every year by the government and a notification of the tax due will be sent to the owner of the property by that time. As the seller has already paid these taxes, when one is going to buying a property, the seller will request the buyer to bear the portion of taxes after the transfer of ownership in corresponding to the number of days owned by the buyer in the calendar year.
Other than the above taxes mentioned, fees such agency fee as well as administration fee charged by the judicial scrivener for providing service during the transaction process will also be incurred. For the agency fee charged by real estate company, the general calculation for a property priced above 4 million yen will be 3% of the property price plus 60,000 yen and 10% consumption tax. Besides, as it is always required to employ a judicial scrivener to handle all legal related documents and proceed further for the government related procedures, administration fee will be incurred, and the amount will depend on the service provided by the judicial scrivener.
For you easy understanding, here below is the calculation simulation of the sundry costs which might be incurred for buying a second-hand property with price 40,000,000 yen:
| Sundry Costs | Amount (Japanese Yen) |
| Real Estate Acquisition Tax | 900,000 yen |
| Property Registration and License Tax | 700,000 yen |
| Stamp Tax Fee of documents | 30,000 yen |
| City Planning Tax & Fixed Asset Tax | 100,000 yen |
| Real Estate Agency Fee | 1,360,000 yen |
| Administration Fee of Judicial Scrivener | 100,000 yen |
| GRAND TOTAL | 3,190,000 yen |
As per the above rough calculation with the basic taxes and fees incurred, it reveals that the total amount of sundry costs is 3,190,000 yen which is around 8% of the property price. Since this calculation excluded the consumption tax and just for reference, please note that the actual costs will always depend on the market situation, property status and transaction details.
The above briefly introduced the basic information for costs required when acquiring a property in Japan. Some other costs /fees such as fees for mortgage, insurance, etc that have not been mentioned here might be arouse as it depends on cases of different properties transaction. Therefore, it is better to consult with the real estate agency to get more details about the costs incurred for acquiring the target property beforehand.
(REF: B-PI-02)