Now that you know from our previous article what costs are incurred when you purchase a property in Japan, let us take a look at the taxes and other fees you will need to pay while holding such property.
While holding a property in Japan, there are two types of payments you are responsible for:
(1) Taxes on the property
(2) Fees to maintain the property
Taxes on the property
There are two types of taxes.
(a) Fixed Asset Tax: Assessed value of property x 1.4%
➟ What is fixed asset tax?
Fixed asset tax is a tax levied by the local government on land, buildings and other depreciable fixed assets. The assessed value of property is determined by the municipality where the property is located.
➟ Who pays it?
The person who owns the property as of the first day of January each year is liable for the payment of this tax.
➟ When to pay?
It is an annual tax but the payment is usually made in four installments (June, September, December and February) in one financial year.
➟ If the property is transferred during a year?
The seller is still responsible for the payment of the gross tax amount while the buyer reimburses a part of it that corresponds to the period of the buyer’s ownership in the year.
For example, if the property is transferred to the buyer at the end of June, the seller still pays the gross tax amount to the local government while the buyer pays the seller half of the amount.
(b) City planning tax: Assessed value of property x 0.3% (capped rate)
➟ What is city planning tax?
City planning tax is a tax earmarked for costs and expenses for city planning works and land readjustment works carried out by the municipality.
➟ Who pays it?
This tax is levied on the owner of land and buildings within any Urbanization Promotion Area designated by the municipality.
➟ When to pay?
It is paid together with fixed asset tax, in four installments throughout the year.
These taxes are payable by the owner of the property regardless of whether you reside in Japan or not. If you are a non-resident of Japan, you will need to appoint a “Tax Agent” who is a resident of Japan and can pay the taxes on your behalf. Once you have a Tax Agent, you are required to notify the local tax office that has jurisdiction over the property by submitting a form called “Notification of Tax Agent”.
Fees to maintain the property
Each condominium must have a management association composed of all the condominium owners. The condominium management association is established for the purpose of managing and maintaining the building, but usually outsources part or all of the management and maintenance work to a property management company.
➟ What are the fees to maintain the property?
(a) Management fee
This fee is charged for the management and maintenance of the common area of the building, such as utility bills and janitorial service, fees to replace lighting bulbs, fire insurance, and also commission paid to the property management company.
(b) Sinking Fund
Sinking fund is a fund set aside for major building repairs to maintain the value of the building for a long period of time.
➟ Who pays the fees?
Each condominium does. The amount of these monthly payments varies depending on the property but in many cases, the total of these two payments is around 30,000 yen monthly.
➟ When to pay?
Usually, the fees are charged monthly and deducted from your bank account.
