Table of ContentsAre you curious about the amount of taxes you'll be responsible for when buying a home in Japan? Understanding property taxes is crucial, as they are recurring payments that come with owning real estate. Luckily, being aware of your potential tax obligations in advance can bring peace of mind. In this article, we'll delve into the world of property tax, shedding light on its definition, calculation methods, and payment timelines. Whether you're a prospective real estate buyer or simply seeking knowledge, join us as we talk about the intricacies of property tax.Call or email us here >>What property taxes must be paid after buying property in Japan？Property tax is a tax imposed on owners of fixed assets such as land, houses, and depreciable assets.In Japan, after purchasing a property, the tax is imposed on the land and the house each January.Taxable Property TaxIn addition to residential land, the following types of land are subject to property taxation:●fields and rice paddies●mountains and forests●(mineral) springs●lakes and swamps●grazing land Furthermore, wilderness areas and salt fields are subject to property taxation as well. Houses, in addition to dwellings, include the following:●stores ●factories●storage facilitiesDepreciable assets are assets that decrease in value over time and include the following:●personal computers●copy machines●medical devices ●airplanes ●ships For land and houses, taxation is levied by the municipality in which they are located.For depreciable assets, taxation is levied after an annual report of the depreciable assets owned is filed with the municipal office in the area where the depreciable assets are located.These fixed assets are registered in the fixed asset taxation registry, and taxation is levied on the person who is registered as the owner as of January 1.Property taxes after real estate transactionsWhen purchasing or selling real estate, the buyer assumes the role of taxpayer starting from January 1 of the subsequent year, and property taxes for that particular year are imposed accordingly. This means that the seller is responsible for property taxes in the year the purchase agreement is finalized, as January 1 serves as the taxable record date. However, it is common for sellers to negotiate the property tax burden within the sales contract, stipulating that "the buyer shall bear the property tax from the date of property transfer." Specifically, the buyer pays the seller an upfront amount for the property tax, calculated proportionately based on the date of property transfer. The seller then receives this payment and settles the property tax on the designated due date. It's important to note that when purchasing real estate, the property tax settlement fee for the year of purchase will be incurred as a miscellaneous expense.How much property tax will I have to pay after purchasing real estate?Now, let's explore how to calculate the amount you'll be liable to pay in property taxes each year following your property purchase. The calculation method involves multiplying the tax base amount by 1.4%. The tax base amount is determined based on the value recorded in the fixed asset taxation registry as of January 1, and you can verify it on the notice of payment for fixed asset tax. To estimate the tax base amount, you can use the following calculation method to get an approximate figure.● Land = Official land price (koji kakaku) x 70%.● Houses = price of new construction x 50% to 60The official land price is the price of land announced by the Ministry of Land, Infrastructure, Transport and Tourism every March, and can be found on the Ministry of Land, Infrastructure, Transport and Tourism's Standard Land and Standard Land Search System.The tax rate of 1.4% is the standard rate, which may be higher or lower than 1.4% in some municipalities.Special Exception for Residential LandFor land on which a dwelling is built (residential land), there is a special exception that reduces the property tax.The taxable standard value becomes a lower price, and the property tax is reduced.The calculation method for the special exception for land used for residential purposes is as follows:●Land for small-scale residential use: Tax base x 1/6●Land for general residential use: Tax base x 1/3 Small-scale residential land refers to land used for housing that measures 200 m2 or smaller, whereas general residential land refers to land used for housing exceeding 200 m2. For instance, if the taxable standard value of small-scale residential land is 30 million yen, the corresponding property tax is calculated as 30 million yen multiplied by 1/6, resulting in 5 million yen. Applying the standard tax rate of 1.4% to this amount gives a property tax of 70,000 yen. Without the special exception for residential land, the calculation "30 million yen x 1.4%" would yield 420,000 yen, highlighting the substantial reduction in property tax granted by this exception.Property taxes on real estate transactionsAs mentioned in the previous chapter, it is common for the buyer to negotiate with the seller at the time of the real estate sales contract to pay the seller a settlement amount for the year's property taxes.For example, if a property with a property tax of 300,000 yen is delivered on August 1, the pro-rated calculation method is as follows. ●Seller’s burden：300,000 JPY×211 days（Jan 1 – July 31）/365＝174,000 JPY ●Buyer’s burden: 300,000 JPY x 154 days (August 1 - December 31)/365 = 126,000 JPY When pro-rated as per the above, the buyer will pay the seller 126,000 yen as a liquidation payment for property tax.(Incidentally, the average amount of property tax is about 100,000 yen to 300,000 yen, and the tax base amount and tax rate differ depending on the area and the age of the property.When do you pay property taxes on real estate purchases？Now that you know how much property taxes cost, you may be wondering when and if you need to pay them.Property tax notices are sent to the owner of the property as of January 1, and payment must be made by the payment due date indicated on the notice.Payment schedulePayment schedules may differ depending on the municipality but in general, the payment due dates are as follows: ●April : Tax Notification arrives ●June : First quarter tax payment due ●September : Second quarter tax payment due ●December : Third quarter tax payment due ●Following February : Fourth quarter tax payment due The tax notice that arrives around April contains a payment form divided into four installments per year, each of which must be paid by the payment deadline indicated on the form.If you miss a property tax payment due dateIf a payment is missed, a late fee will be incurred as a penalty. The late fees are calculated as follows: ●Delinquency up to one month after the due date: Special standard rate + 1% per annum (maximum 7.3% per annum）●Delinquency more than one month after the due date: Special standard rate + 7.3% per year (maximum 14.6% per year)The special standard percentage undergoes an annual review and will be set at 1.4% for the year 2022. As a result, an additional 2.4% will be added to the tax amount for payments delayed by up to one month, while payments delayed by over one month will incur an 8.7% surcharge. It's important to note that the longer you delay your payment, the more your property taxes will increase, so it's crucial to meet the payment deadline to avoid inflated amounts. However, if you have concerns about remembering to make quarterly payments, opting for a lump sum payment can alleviate those worries. It's worth noting that the availability of lump sum payments may vary by municipality, so it's advisable to consult with your local government for further guidance.Payment methodProperty taxes can be paid at a bank or convenience store with the payment form included in the tax notice.You can also have your taxes automatically deducted from your bank account if you follow the procedures for account transfer at your bank. Depending on the local government, you may also be able to pay by credit card or electronic money.If you have lost your property tax remittance form, you can ask the tax department of the municipal office to reissue a new form.However, be careful not to lose your tax notice as it cannot be reissued.In conclusion To sum up, this article provided an in-depth understanding of Japanese property tax, including its definition, calculation process, and payment schedule for prospective real estate buyers. In Japan, property tax is an annual levy imposed on land, houses, and depreciable assets. The calculation method involves multiplying the tax base amount by the standard tax rate of 1.4%. However, it's important to note that the tax rate may vary depending on the municipality. Payments are due four times a year, with tax notices typically sent out around April each year. It is crucial to avoid missing the payment due date, as late payments will incur additional fees. Stay vigilant and ensure timely payment to fulfill your property tax obligations.