Legal & Regulations

Cost to exit : Understanding the tax angles when you buy the property in Japan Part-3


Successful investment strategy doesn’t simply mean buying and operating property.

Exit strategy is significantly important for the overall success.
You need to think about the exit strategy while you are acquiring property.
When you build the exit strategy, tax laws play the important role.
Today I am discussing the tax regulations when you sell your property outright.
Tax when you exit the property
The capital gain generated by selling your real estate is called transfer
income
in Japan  (It is almost same as capital gain tax in US)
To calculate the capital gains or losses, take the sales price then deduct selling expenses,
from the amount realized. Then deduct the original cost of property, plus expenses deemed to
have increased its value, less claims which have notionally decreased its value.
Expenses deemed to have increased its value are capital improvements
(roof replacement, central air conditioning installation, rewiring, etc.), assessments for local improvements
(water connections, sidewalks, roads), casualty losses (restoration of damaged property), legal fees.
Expenses deemed to have decreased its value are depreciation, casualty or theft loss deductions
and insurance reimbursement, certain credits, exclusions and deductions.

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Are there any rogue real estate agents in Japan ?

The real estate trade can be stressful in any country.
The financial commitment is substantially large, the regulations and laws are complex
and the market risk is high.  Average Japanese people share the same concern.
Another problem is a large part of consumers’ assumption that all estate agents, letting agents and
landlords are all regulated. In Japan, all the agents who actually arrange the real estate transactions
(including rental contract) 
must be licensed.
Engaging in the marketing activity to lure the investors without holding a license is against the
Building Lots and Buildings Transaction Business Law. If your consultant or agent do not hold
the license, your contract is not completely protected by the said law.
It would be treated more under civil law. But if your broker is licensed, they are regulated by the government
and thus your contract is 
eligible for more protection under the conditions set forth by the said law.
Nonetheless, there are some rogue agents or consultants who are not licensed in Japan.
For example, such rogue agents put up advertisements for properties on which they have not been
instructed to promote in an attempt to get a cut of the fees.

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Cost to hold your property : Understanding the tax angles when you buy the property in Japan Part-2

Previously I discussed the transaction taxes you have to pay at time of the acquisition of the property.
When you are holding the property (both land and building) in Japan, you need to pay two annual taxes whether you are making money out of the investment or not regardless of the purpose of the ownership.
One is fixed asset tax and second is city planning tax.
Land and houses and buildings on which the city planning tax is levied are the same as the objects of taxation for the fixed assets tax.
When the deal went through. the new owner’s first annual property-tax bill came to standard rate 1.7% of its assessed value.
Unlike London or New York, in Japan the same tax rate is applied to price band.

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Acquisition cost: Understanding the tax angles when you buy the property in Japan Part-1



One of the principal rules of property investment is
that no property should cost more than it produces.
You obviously want to see the positive cash flow every month.
But from the tax management point of view, that is not the case.
When you are filing a tax return in March, you want to appear to be in red or break even.
The Japanese government in fact encourages investors to book the depreciation
that allows you post a deduction for the certain portion of the value of your property.
Tax code in Japan changes very frequently, almost every year.
I strongly advise that you should check with your broker or tax specialist
(tax accountant,  CPA) before you take a significant action.
Tax is the biggest cost in the property investing.
Tax management therefore is a key for successful real estate investors.
Today I am going to discuss the taxes that investors need to pay when they
buy the real estate in Japan.
The following discussion is based on the tax laws which are applicable
as of end 2017.
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Notorious inheritance tax: Is it high ? -Brief on Inheritance tax in Japan as of 2017-

It comes to my attention that many foreign nationals who live in Japan
permanently or (semi-permamently) are
concerned about Japan’s inheritance tax.
I will give you some good guidance about it as follows.

1) Do we all have to pay
    the inheritance tax ?

There is growing concern about the inheritance tax in Japan. In 2013,
the Japanese government passed the bill and lowered the deductible amount
for charging the inheritance tax (hence effectively raised the tax rate).
The new law became effective from 2015.
However one statistics say the currently only
about 8 out 100 taxpayers in Japan are actually imposed the inheritance
tax so majority of us
do not really have to worry about it
unless you are very high net worth investors or entrepreneurs with
the net taxable asset which 
is well over 100 million yen or so.Read more