Real Estate Acquisition Tax in Japan
As part of our series on taxes in Japan, here we focus on Japanese real estate taxes in particular, and in this case, on the real estate acquisition tax (不動産取得税) in Japan.
Japanese Real Estate Taxes
As you buy real estate in Hokkaido, there will be a few taxes associated with taking ownership of property.
There are ongoing taxes that are paid every year, including local real estate taxes such as property taxes (that bill also includes the “city planning tax and fixed asset tax”). And there are other taxes associated with the sale including a stamp tax, a consumption tax, the registration tax (which is paid to the judicial scrivener, along with their fees), and the real estate acquisition tax.
The real estate acquisition tax is the focus of this post.
“Sales Tax” on Real Estate In Japan
Both the consumption tax and the real estate acquisition tax are basically a kind of sales tax related to buying real estate in Japan. The consumption tax (消費税) is a national tax (currently set at 10% of the selling price), and that tax is typically included in the listed price of the property. It is collected as a part of the buying process. The real estate acquisition tax (不動産取得税) is a local tax (currently between 3-4% of the assessed value) and a bill for that tax is mailed to the buyer some time after the sale.
If you’re a buyer from America or some other western country, this kind of real estate “sales tax” may come as a surprise. In the US, sellers and buyers pay property tax, and there may be closing costs associated with mortgages and real estate loans, but US buyers don’t pay a sales tax related to the purchase itself. In Japan, they do – both at the national and local level.
Real Estate Acquisition Tax is Based on Assessed Value
After the purchase is completed, the real estate acquisition tax (不動産取得税) will be sent from the local government to the buyer. This real estate acquisition tax is not based on the purchase price, it is based on the assessed value of the property. The assessed value is decided by the local government, and is on file with the local government office. This same assessed value is used to determine property tax and to evaluate real estate loans in Hokkaido. The assessed value is typically less than the market price (roughly 70% of the market price).
The real estate acquisition tax is 3 – 4% of the assessed value.
For homes that are not new construction, the local government entity will send a bill for this tax approximately four to six months after the sale is completed. This tax comes as two separate bills; one assessment for the land, and a separate assessment for the structure (if any).
For newly constructed homes and buildings (where the government hasn’t determined an assessed value yet), it may take some time before the tax bill is received. For example: For houses built with wood construction, the tax bill isn’t issued until after the new home is registered in the fixed asset taxation registry of the municipality (which happens in the month of April, following completion of construction).
Real estate agents are not tax experts, but (if you ask) many can give you an informal estimate of the approximate real estate acquisition tax to help you to be prepared for that payment when the bill comes. For introductions to real estate agents in Hokkaido, please contact us any time.
Real Estate Acquisition Tax Exemptions
In some cases, the property owner may be able to apply to reduce the real estate acquisition tax. Some situations when there might be some real estate acquisition tax exemption include:
— When the house is new construction built for the owner
— When the property includes a residence that is occupied by the owner
— For existing houses, there can be exceptions based on the size and age of the residence
— When the purchased home is confirmed to conform to updated earthquake resistance standards
— When an existing house and its site do not conform to the earthquake resistance standards, but are then renovated to be more earthquake resistant
— When ownership of the land or building is temporarily assumed, renovated, and then transferred to an another individual (before a specified time)
— When the house has sustained significant damaged due to a disaster
To apply for an exemption to the real estate acquisition tax, visit the local tax office, bring the tax notices that were sent by the government and the real estate title registry documentation – called “登記識別情報” (after the sale is completed, your judicial scrivener will recorded the sale with the local government, and then will mail you this document).
A good time to visit the tax office to see if you might be eligible for an exemption to the real estate acquisition tax is after you receive the bill, but before it is due. You can also pay the tax, and then apply for an exemption after it is paid (and potentially receive a refund of any overpaid tax).
Real Estate Tax Offices in Hokkaido
Tax offices in Hokkaido can sometimes help with real estate acquisition tax questions (including request for exemptions). The appropriate Japanese tax office to visit is based on the location of the property that was purchased. Some examples of local tax offices include:
Chitose, Ebetsu, Eniwa, Kitahiroshima
Niseko, Kutchan, Rusutsu
The locations of more Hokkaido tax offices can be found on the Hokkaido prefecture government website.
Help with Real Estate Taxes in Hokkaido
If you have tax questions about real estate in Hokkaido, there are several points in the process of buying or selling real estate in Hokkaido where you can ask for help. To begin with, your real estate agent can explain most of the important taxes and real estate tax deadlines in Japan. For introductions to Hokkaido real estate agents that speak English (and other languages), contact us any time.
If you have more complicated question, there are tax consultants in Hokkaido that can help you. If you’d like an introduction to a tax specialist, including tax accountants in Sapporo that speak English, contact us, we’re happy to help.
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For More Information:
— Our Taxes in Japan page
— Our Guide to Buying a House in Hokkaido
— How to Find a Hokkaido Real Estate Agent
— Buying Property in Hokkaido as a Foreigner
— Find Lawyers in Hokkaido
— Tax Offices in Sapporo