Japanese Property Investment Guide for Foreign & Hong Kong Buyers
Below is a general procedure of buying a Japanese Property as a non-resident. This guide is applicable to buying property in Tokyo, Osaka, Sapporo etc.
1. Reserve a Unit
Once you have decided to purchase a specific unit of a Japanese property, you are required to sign the Letter of Intent.
2. Pay Deposit
After the buyer has agreed with the reservation, 10% of the purchase price is payable by the buyer as deposit. Concurrently, the seller will provide more information of the overseas property for the buyer such as the lease and tenant's info.
3. Contract Exchange
Once the buyer has confirmed to purchase the reserved unit and already transferred the deposit to the buyer's account, the overseas property agent will prepare the contract and fix the completion date with the buyer.
4. Pay the remaining amount of the purchase price
After signing the Sales & Purchase Agreement, the remaining amount of the purchase price is payable upon completion. (The payment terms may vary from different developers.)
5. Apply for mortgage
Three months before handover, the buyer must apply for mortgage. Normally, foreign investors are eligible for applying a 60% mortgage*. (Terms and conditions may vary depending on the buyer's background.)
6. Handover
In the morning of handover, a Japanese lawyer will transfer the buyer's name at the local land registry to grant the ownership to the buyer.
Frequently Asked Questions
Q: How long does it take to purchase a Japanese property?
A: It depends on the completion date. Take completed properties as an example, it only takes around 2 months starting from signing the letter of intent to complete the process.
Q: Do I need to buy insurance for my Japanese property?
A： It is not necessary. Generally, Japanese will buy fire insurance for their properties which is equal to the home insurance in Hong Kong. A 5-year fire insurance and earthquake insurance cost around JPY¥100,000 - 150,000.
Q: Are Japanese properties freehold or leasehold?
A: Japanese properties can be freehold or leasehold. The shortest leasehold is 30 years.
Q: What are L, D, K, S stand for?
A: L stands for Living Room, D stands for Dining Room, K stands for Kitchen, S stands for Storage room.
Q: After purchasing Japanese property, when will I receive the rental returns?
A: You may choose to receive the rental returns every four months or every year by TT transfer.
Q: What is the percentage of mortgage I can apply for purchasing Japanese property?
A: Foreign investors can apply for 60% mortgage. The interest rate can be as low as 2.8% per annum and loan period can be 35 years. (The terms and conditions may vary by time.)
Q: Are there any expenses when I buy / sell Japanese property?
A: Buying or selling second-hand Japanese property is required to pay 3% of the purchase/selling price as the agent's commission. If the client has assigned a rental management company to manage their properties, the management company will charge 5% of the rental return as management fee. The rental management company is responsible for collecting rent for the property owner, help pay the taxes for the owner and more. Besides, the property owner is required to pay for the property management fee and maintenance fee.
Property Taxes of Japanese Property for Non-Residents
When you BUY a Japanese Property, there are certain taxes you need to pay.
One-off Taxes:
- Registration Tax: It is taxed at 1%-2% of the property value. The tax is levied on the valuation of the property conducted by local government agencies, which is often around 60% to 80% of the market value of the property.
- Acquisition Tax: 3% of the assessed value of the property provided by the government
- Stamp Tax: Depends on the purchase price of the property. See below table for more details.
| Property Price (JPY¥) | Rate (JPY¥) |
|---|---|
| Up to ¥10,000 | ¥0 |
| ¥10,001 - ¥100,000 | ¥200 |
| ¥100,001 - ¥500,000 | ¥400 |
| ¥500,001 - ¥1,000,000 | ¥1,000 |
| ¥1,000,001 - ¥5,000,000 | ¥2,000 |
| ¥5,000,001 - ¥10,000,000 | ¥10,000 |
| ¥10,000,001 - ¥50,000,000 | ¥20,000 |
| ¥50,000,001 - ¥100,000,000 | ¥60,000 |
| ¥100,000,001 - ¥500,000,000 | ¥100,000 |
Other Taxes:
- City Planning Tax: A flat rate of 0.3% on the assessed value of the land or building. The property is exempt if its value is less than certain thresholds. City planning tax is levied together with the property tax. For both taxes, the owner of the land or building is liable.
- Municipal Tax: It is taxed around 1.4% on the properties' assesement value. To exclude the property tax, the land's assessed value must not exceed JPY¥300,000.
- Income Tax: Rental income earned from Japanese property are taxed among 5%-45% for foreign buyers. Taxable income calculated by the gross rent deducted from income-generating expenses and depreciation.
| (JPY¥) | Rate |
| ¥1,000 ~ ¥1,950,000 | 5% |
| ¥1,950,001 ~ ¥3,300,000 | 10% |
| ¥3,300,001 ~ ¥6,950,000 | 20% |
| ¥6,950,001 ~ ¥9,000,000 | 23% |
| ¥9,000,001 ~ ¥18,000,000 | 33% |
| ¥18,000,001 ~ ¥40,000,000 | 40% |
| ¥40,000,001 or above | 45% |
When you SELL a Japanese Property
- Capital Gains Tax: When you sell a Japanese property as a non-resident, you are required to pay the Capital Gains Tax. By selling a Japanese Property owned no more than 5 years will be taxed at 30% of the net gains. If the property used as a personal residence, JPY¥30 million could be deducted from the gross sales price, if the taxpayer could meet certain conditions. The taxable gain is calculated by deducting the acquisition costs and related expenses, improvement costs, and transfer costs from the gross sales price. Net gains from the sale of properties held for more than five years will be taxed at 15%
While Japanese Properties owned more than 5 years will be taxed at 15% Capital Gains Tax from the net gains.
*This investment guide is served as a general guideline only. The terms and conditions may vary from different developers.
