Other than the purchase price, what costs are involved in purchasing a property in Japan?

Solicitor / Translation fees
Real estate commission

In Japan, real estate commission is paid by both the buyer and the vendor at the same rate of 3% of the Purchase Price plus ¥60,000.

The commission is calculated using a bracketing system; For example:

If you purchase a ¥9,000,000 property, the commission will be calculated as follows:

5% of the first ¥2,000,000 + 4% of the next ¥2,000,000 + 3% of the remaining value ¥5,000,000

Total = ¥100,000 = ¥80,000 = ¥150,000 = ¥330,000

This is the same as calculating 3% of ¥9,000,000 plus ¥60,000

Contract Stamp Duty

Government revenue stamps which need to be purchased and then affixed to the Sales Contract and Statement of Important Matters documents.

Title Registration Stamp Duty

A government duty which is calculated on the government assessed value of the property (not the Purchase Price).

Title Registration Certificate Charge

Annual Fixed Assets Tax

The rateable value of the property as determined by the government is paid on an annual basis (also known as 'rates' or 'property tax' in other countries). This is charged on January 1st and paid in May of the same year. This tax is paid in advance, hence at settlement the pro-rata amount of tax remaining for the calender year is refunded to the vendor by the buyer.

Bank Charges

Calculated at a rate of 0.0005% + ¥1,500 for each transfer received from the buyer during the purchase process.

Can foreigners buy real estate in Japan?

Yes. Overseas nationals can legally buy land in Japan without restriction and permanent resident status is not required. Most buyers in Niseko bought their homes on a short-term visitor’s visa.
What is the title to land in Niseko? The majority of land in Niseko is free hold title. Some property in near the lifts in Annupuri Village and Rusutsu is perpetual lease.

Is finance available for purchases in Japan?

Yes. The global financial crisis shook up the world finance industry and put lending on hold for some time in Niseko, however, recently overseas banks are beginning to come back into the market.

Currently, it is difficult for overseas residents to borrow from Japanese banks unless they gain permanent residency and build a local history of earnings.

Contact LJ Hooker to find out more.

What is the role of the real estate agent?

The role of a real estate agent includes conduction searches on the legal title and ownership of the property as well as relevant regulations, town planning guidelines and zoning issues. The real estate agent also markets the property, finds a buyer and negotiates the contract of sale. Once the terms have been agreed the agent will prepare the contracts and paperwork so that the property can be transferred to the new owner. Overseas, this is often done by a lawyer or other outside party on a fee basis
All real estate companies must be licensed by the Japanese Government to buy and sell property. LJ Hooker Niseko is a certified real estate agent (Governor of Hokkaido, Region 1, Shiribeshi 340).

Will I need to find a lawyer to act on my behalf?

You certainly can choose to find your own representation if you so choose, however, in the vast majority of cases lawyers are not required in the transfer of title in Japan. Real estate agents prepare all the necessary contracts for exchange and a judicial scrivener is brought in at the end of the process to confirm identities of both parties and to register the title changes. The scrivener is typically chosen by the real estate company.

Are there any penalties for defaulting on contracts?

Penalties for defaulting on real estate sales contracts usually involve the forfeiting of the deposit and the same amount again for the vendor and the purchaser forfeits only the deposit amount.

What about taxation?

The following is an overview of the taxes related to buying, selling and letting property in Japan. Please consult your financial professional for full details.

Real Estate Acquisition Tax and Stamp Duty

Real Estate Acquisition Tax is levied at 3.5% for non-residential properties or 3% for residential properties, based on government valuation, which is based on registered council records rather than the purchase price. Government valuations tend to lag market valuations – by as much as 50% in some parts of the Niseko-Mt Youtei area at the time this booklet was prepared. Stamp duties are also levied on property sales contracts but they are small and the maximum duty is likely to be ¥180,000.

Fixed Asset Tax

Annual fixed asset (property) taxes are levied in Japan at a rate of 1.4% and are based on the size of the property and type of construction using government valuations. The first fixed asset tax installment after buying a property is calculated pro-rata from the date of settlement until 31 December of the same year.
Under Japanese law a local agent or resident must be nominated to collect fixed asset taxes. Property management companies offer administration of Japanese taxes. LJ Hooker will help you select a property management company.

Consumption Tax

Japan’s goods and services tax – known as consumption tax – can be levied on both new and old buildings, but not land. LJ Hooker Niseko will advise you whether the price is gross or net of consumption tax.

Capital Gains Tax

Capital gains tax varies depending on the length of time the property has been held and whether it has been used as a place of residence or not. The basic calculation for Japan based vendors is 39% if the property is sold within 5 years and 19% if it is sold after 5 years. If overseas based, then the percentages drop to 30% and 15%.  There are other mitigating factors and it is best to confirm all tax payments with a registered tax accountant which we can assist with when necessary.

Rates

Many local public services in Japan, such as rubbish collection, are provided by local community organisations. Property owners pay a small charge for these services and payments are usually administered by property management companies as notices are sent in Japanese.

Taxation of Rent and Personal Income

Rental earned on properties is taxable as personal income, but rental property owners can offset taxes with accelerated depreciation expenses in the first five years after their property is built and so may not face income taxes for rentals over this time. Interest payments may also be deductible against rental income.

Withholding Taxes

On some occasions withholding tax may be charged on payments for rent and property sales. This occurs when payments are made from Japan to overseas bank accounts. However, Japan has tax treaties with most industrialised nations that prevent double taxation of income earned in Japan.
* This advice is to be used as a guide only, please consult your tax accountant for complete and up to date tax advice.

Do I need a tax manager?

If a buyer normally resides outside of Japan, it is necessary to appoint a tax manager in Niseko who can pay for the taxes outlined above. Failing to appoint a tax manager can create major headaches and even result in repossession of real estate although very rare. Our partner company Niseko Resort Property Management (NisekoRPM) provides tax proxy services for offshore residing clients.

What about property management?

With net yields approaching 4%, most overseas purchasers are property buying to let while they are at home. LJ Hooker advises you to employ a property management company to organise lettings, manage new snow clearance and administer local taxes (see below). We will help to organise a management company to administer your property.

What is the Innkeeper's License?

In Japan, most houses and apartments are suitable for long term rentals without special license. However, for short-term rentals, an innkeeper's license is necessary as the property is recognized as a “hotel” under Japanese law. If the building was originally designated as a residential property at construction, it will need to be changed to a hotel in order to receive the license. This involves an inspection by the fire department to ensure that the property conforms to the necessary standards (such as fireproof carpets, exit lighting, etc.). In addition, the innkeeper’s license needs to be registered to someone who resides in Japan. As the details are different depending on the type and size of building, please contact us for more details.
How do local people feel about overseas investment?
Local government representatives and the community welcome overseas purchases of property. Western tourism and investment to Niseko has brought an unexpected prosperity to the area which has been welcomed with open arms.
The mayors of Kutchan, Hiroshi Ito, and Niseko Ryuichi Sato are actively promoting investment and assisting overseas investors. The Niseko council has set up a unit to coordinate development of the resort and provide English speaking local government contacts.

What is a Tsubo?

A Tsubo is a measure of land area in Japan and is used in land sales. One tsubo is equivalent to 3.305m2. The word tsubo comes from the measurement of 2 tatami mats (traditional Japanese flooring mats).

What are footprint and floor area ratios for Niseko?

Firstly, these differ greatly between Kutchan shire and Niseko shire, and various zoning within each shire has varying restrictions. The areas of Hanazono and Hirafu fall under Kutchan shire restrictions and Higashiyama, Annupuri and Moiwa are regulated by Niseko shire. The footprint is the actual land area that is to be built on, and calculated as a percentage of the total land area generally 40-50% in Kutchan Shire. The floor area ratio is the allowable total floor area for any building, again calculated as a percentage of the total land area, generally 150- 200% of the total land area in Kutchan shire which has the stricter restrictions compared to Niseko shire. Please note that there are other building restrictions.

At what rate do buildings depreciate in Japan?

According to the Tax Office, building depreciation is as follows: Concrete construction - Pension, inn or hotel - 34 years, Rental cottage - 39 years, Commercial building - 31 years, Residence - 47 years Timber construction - Pension, inn, or hotel - 20 years, Rental cottage - 22 years, Commercial building - 17 years, Residence - 22 years

How do I arrange a land survey?

LJ Hooker Niseko has fantastic connections with local construction firms and can offer in depth advice should you wish to build or develop in the area.

More information

LJHooker Niseko have the experience and the years on the ground in the village to prove it, a great central location, so drop in or contact us if there is anything you need no matter how trivial it seems we are always ready to assist.