Tax implications: When a non-resident sells
or rents out real estate in Japan
OLYMPUS DIGITAL CAMERA
(Case study)
In Japan, taxes are levied on residents (referred to as “residents”) regardless of nationality.
In this case, the income subject to taxation includes not only income generated within Japan
but also income from around the world.
Q:
If a non-resident (overseas transferee or foreigner) sells real estate in Japan,
the buyer has a withholding obligation?
A:
If the seller is a non-resident and meets the following requirements,
the purchaser of the property must withhold 10.21%
of the payment amount when making the payment (*) and pay it to the tax office
by the 10th of the month following the payment of the consideration.
*
Whether it is a deposit or an intermediate payment,
if it is applied to the transfer price of the property,
withholding is required at the time of each payment.
Q：
A non-resident sold an apartment in Japan to a resident.
The buyer will use it for their own residence,
but the selling price exceeds 100 million yen.
Withholding obligation arises for the buyer,
but what specific procedures should the buyer and seller take?
A:
The non-resident has reported a tax manager before leaving the country.
The procedures for the buyer and seller are as follows:
Procedures for the buyer (resident)
Withhold 10.21% of the purchase price
(deposit, remaining payment, fixed asset tax settlement, etc.)
each time the payment is made.
The amount paid to the seller will be 89.79% after deducting the 10.21%.
Fill out the necessary information on the withholding income tax payment slip
(calculation of income tax withholding for non-residents and foreign corporations)
* and pay the withholding tax amount to the tax office
by the 10th of the month following the payment date.
* Since the “payment slip” and “payment statement” of withholding income tax
are required documents when the seller files a tax return,
copies of these documents must be provided to the seller.
Procedures for the seller (non-resident)
The payment amount of 89.79% after withholding 10.21% of
the purchase price will be deposited.
When filing a tax return, a document proving the withheld amount will be required,
so keep a copy of the withholding income tax “payment slip” or “payment statement”
received from the buyer in :
Submit the final tax return to the tax office between February
16th and March 15th of the year following the sale.
If you meet the requirements, you can receive the same 30 million yen
special deduction for residential use as residents.
If the calculated tax amount in the final tax return is less than the withholding tax amount,
you will receive a refund of the difference, and if the withholding tax amount is
less than the tax amount, you will need to pay the difference.
Q:
Are there any tax-related precautions for non-residents when renting real estate?
A:
When non-residents or foreign corporations (“non-residents, etc.”) own and rent property in Japan,
tenants must check the withholding obligation and landlords must verify the need for a final tax return.
When paying rent, if the rented property is owned by a non-resident and withholding is required
as described above, the payer must withhold income tax and reconstruction special income tax at a rate of 20.42%
and pay it to the tax office by the 10th of the following month. In other words, the owner is paid 79.58%
and the tax office is paid 20.42%.
Toshihiko Yamamoto
Real estate investing consultant and author.
Founder of Yamamoto Property Advisory in Tokyo.
International property Investment consultant and licensed
real estate broker (Japan).
He serves the foreign companies and individuals to buy and sell
the real estates in Japan as well as own homes.
He holds a Bachelor’s degree in Economics from
Osaka Prefecture University in Japan
and an MBA from Bond University in Australia
Toshihiko’s book, “The Savvy Foreign Investor’s Guide to Japanese Properties: How to Expertly Buy, Manage and Sell Real Estate in Japan” is now out on Amazon, iBooks (iTunes, Apple) and Google Play.
About the book
Amazon.com Link
