Capital gains tax on Japanese property: the five-year line is drawn on 1 January, and the buyer may hold back 10.21%

The gain is taxed on its own, and that reaches non-residents

A gain on land or a building in Japan is not added to salary or rental income and taxed at the progressive rates. It is taken out and taxed on its own, at a flat rate. The two articles that do this are Art.31 and Art.32 of the sozei tokubetsu sochi ho (租税特別措置法) — the Special Taxation Measures Act, which sits alongside the Income Tax Act and displaces named provisions of it. Art.31 handles long-term gains, Art.32 short-term ones.

Both articles do their work by displacing provisions of the Income Tax Act, and the list of what they displace is worth reading. Each opens by charging the tax 所得税法第二十二条及び第八十九条並びに第百六十五条の規定にかかわらず — notwithstanding Art.22, Art.89 and Art.165 of the Income Tax Act. Art.22 is the aggregation rule, Art.89 the progressive table. Art.165 is the article that computes tax for a non-resident. It is named because it has to be displaced too, which tells you the separate charge is written to operate on a non-resident as well as a resident.

So the starting point is the same whether the seller lives in Osaka or has never set foot in Japan: the gain is separated, and a flat rate is applied to it. What differs is which flat rate, and whether a second tax joins it. Those are the next two sections.

The five-year line is drawn on 1 January

The long rate and the short rate are nearly a factor of two apart, and the line between them is five years. The part that is easy to get wrong is when the five years are measured. Art.31(1) applies to an asset:

The phrase continues into の譲渡, the transfer of such an asset. The test is not applied on the day of the sale. It is applied on 1 January of the year the sale falls in. Art.31(2) then says where the period starts:

From the day after acquisition, to the 1 January in question. Art.32 is the mirror image: five years or less on that same date, and the short rate applies.

Where 20.315% and 39.63% come from

Neither number appears in any statute. Each is built from three charges in three different acts, and it is worth seeing the parts separately, because one of the three does not always apply.

The resident tax rows are split between prefecture and municipality, and the split is reversed inside a designated city — 1% and 4% instead of 2% and 3% for the long-term rate — but the total is the same either way. The surtax rows are arithmetic: 15 × 0.021 = 0.315, 30 × 0.021 = 0.63. Art.13 sets the rate at 百分の二・一 of the base income tax amount, and Art.9 applies it to a 居住者又は非居住者 — a resident or a non-resident — for the years 2013 to 2037.

The reduced rate for a long-held home

Art.31-3 replaces the 15% with 10% on the first ¥60,000,000 of gain where the holding period exceeds ten years as at the same 1 January and the asset is a kyoju yo zaisan (居住用財産) — a dwelling used as a residence. Supplementary Art.34-3 of the Local Tax Act cuts the resident tax to 1.6% plus 2.4% on the same slice. Adding the surtax gives 14.21% on the first ¥60,000,000. Art.31-3(2)(i) describes the qualifying dwelling as のうち国内にあるもの, one located in Japan.

The 5% and 9% are a different tax with a different trigger

The third row of that table is not national tax at all. It is jumin zei (住民税), resident tax, charged by a prefecture and a municipality under the Local Tax Act. It has its own rules about who owes it, and they do not track the income tax rules.

Two articles set the frame. Art.294(1) lists who is liable:

Item (i) is: an individual who has a jusho (住所) — an address, in the sense of the place where a person is settled — within the municipality. Art.318 then fixes the date on which that is tested:

The assessment date for an individual's municipal resident tax — the article calls it the fuka kijitsu (賦課期日) — is 1 January of the year in which the fiscal year begins. One day, once a year.

Now read the transfer-gain provision against those. Supplementary Art.34(1) charges the prefectural rate where a 所得割の納税義務者 — a person liable for the income-based portion — 前年中に, during the previous year, had a gain within Art.31(1) of the Special Taxation Measures Act. The charge is framed as falling on a person who is liable this year, in respect of income of last year. A person who is not a 納税義務者 on the assessment date is not within the opening words of the article.

That is the whole of what the texts say, and it is the reason the income tax side and the resident tax side of a sale can come apart. The income tax and surtax on a gain follow the sale. The resident tax follows a status held on the following 1 January.

The buyer may be required to hold back 10.21%

This one is not the seller's obligation at all, which is exactly why it surprises people at closing. Where the seller is a non-resident, the law places a duty on the buyer to withhold from the price and pay the withheld amount to the state.

Art.161(1)(v) of the Income Tax Act makes 国内にある土地若しくは土地の上に存する権利又は建物及びその附属設備若しくは構築物の譲渡による対価 — the consideration for a transfer of land, rights over land, or buildings and their fixtures and structures situated in Japan — Japan-source income. Read that word again: the item is the price, not the gain. Art.212(1) then requires the payer to withhold on payment and remit by the tenth of the following month, and Art.213(1) fixes the amount:

Ten per cent, and Art.28 of the reconstruction funding act adds 2.1% of that, which is where the familiar 10.21% comes from. Because the base is the price rather than the profit, the withheld amount can exceed the tax due on a modest gain, or apply to a sale at a loss. It is a payment on account: Art.164 routes this income into the assessment provisions, so the amount withheld is credited when a return is filed, and any excess is refunded through that return.

The carve-out has two conditions, and both must hold

Art.161(1)(v) ends with 政令で定めるものを除く, excluding what a cabinet order prescribes. Art.281-3 of the enforcement order is that cabinet order, and it is a single sentence:

Two conditions, joined, not alternatives. The consideration must not exceed ¥100,000,000, and it must be paid by an 個人 — an individual, not a company — who took the property 自己又はその親族の居住の用に供するために, to live in it themselves or to house a relative there. Miss either and the carve-out does not apply.

The duty in Art.212(1) is the buyer's, and the deadline in it is the buyer's. Nothing on this page is addressed to a buyer about how to discharge that duty. This section is here because the withholding changes what arrives in the seller's account on the day, and because the amount is set against the seller's tax later rather than lost.

The 5% cost figure is not in the statute

The gain is the price less the acquisition cost less the costs of sale. For a property bought decades ago, or inherited, the purchase contract may not exist any more. The answer reached for in that situation is five per cent of the sale price. It is a real treatment. It is not, for anything bought in living memory, in the statute.

Art.31-4(1) of the Special Taxation Measures Act opens like this:

The sentence continues into a proviso allowing the actual cost instead where it is proved to be higher. But look at what the opening words confine it to. The asset must have been held continuously from on or before 31 December 1952, and the computation must be of a long-term gain. On the face of the act, a flat bought in 2005 and sold at a short-term gain is outside it twice over.

What extends it is a circular — a tsutatsu (通達), an instruction from the National Tax Agency to its own officials. Item 31の4-1 reads in full:

The operative words are 差し支えないものとする — there is no objection to it. That is the form used for something permitted, not required. The second limit, long-term only, is lifted the same way, in a published Q&A on the agency's site:

One thing the 5% is not is a licence to ignore records that do exist. Art.31-4(1) itself frames the actual figure as the alternative where it is proved to be higher, and for a building the cost brought into the computation is reduced over the years of ownership. Our property tax calculator covers the one-off taxes on the way in, which are part of what a purchase actually cost.

The ¥30,000,000 deduction and the three-year window

Art.35 subtracts up to ¥30,000,000 from the gain on a home before the rate is applied. It works by rewriting the words of Art.31(1) and Art.32(1), which is why it reads oddly on its own: the article is a set of textual substitutions rather than a relief written out in ordinary form.

Art.35(2) defines the case in two items. Item (i) is a dwelling the individual is living in. Item (ii) is a dwelling they have stopped living in, and it carries the window:

The item ends there. The window runs from the day the dwelling stopped being lived in to 31 December of the year containing the third anniversary of that day — so a home vacated in March 2024 carries the window to 31 December 2027, and one vacated in December 2024 carries it to the same date. The National Tax Agency's published conditions add that what the property was used for after it stopped being a home does not matter for this item.

Art.35(2) also shuts the relief off where it, or one of the listed replacement or loss reliefs, was taken in either of the two preceding years, and Art.35(2)(i) excludes a sale to a spouse or to the other related persons a cabinet order specifies.

A separate ¥30,000,000 for a house that came from an estate

Art.35(3) is a different relief in the same article, for a dwelling acquired by inheritance or bequest. It runs 平成二十八年四月一日から令和九年十二月三十一日までの間 — 1 April 2016 to 31 December 2027 — is confined to transfers made by 31 December of the year containing the third anniversary of the death — the same shape of window as item (ii) above, though the clock starts on the death rather than on the day the dwelling was vacated — and excludes a transfer for more than ¥100,000,000. Art.35(4) cuts it to ¥20,000,000 where three or more heirs acquired the property. If an estate is how the property arrived, our guide to inheritance tax covers the registration deadlines that attach on the way in, which run on their own clock and carry their own penalty.

One defined word decides when the return is due

Sell, then leave Japan in the same year, and the deadline for the return moves — unless one document has been filed. The mechanism is in the definitions section of the Income Tax Act, which is not where anyone looks for a deadline.

Art.127(1) requires a resident who leaves Japan (出国, shukkoku) part-way through a year to file for the period up to that point その出国の時までに — by the time of departure. Read alone that is alarming. But 出国 is a defined term, and Art.2(1)(xlii) defines it, for a resident, as:

The definition continues with a parallel limb for a non-resident. Ceasing to have a 住所 and a 居所 in Japan is only half of it. The other half is doing so without having filed the notification of a nozei kanri nin (納税管理人) — a tax agent in Japan. File that notification and the accelerated deadline is not triggered, because the departure is not 出国 as the act defines it.

Art.117(1) of the kokuzei tsusoku ho (国税通則法) — the Act on General Rules for National Taxes — is the appointment provision, and it is not written as an option: 納税管理人を定めなければならない, must appoint a tax agent, from among persons with an address or residence in Japan who are conveniently placed to handle the matter. Art.117(2) requires the notification. Art.166 of the Income Tax Act applies the ordinary filing provisions to a non-resident, which is how the 15 March deadline reaches someone who has already left.

What we could not confirm

Every guide here carries this section, because the alternative is filling a gap with something that reads like an answer.

• ■Whether the ¥30,000,000 deduction is applied to a seller who is a non-resident. Neither Art.35 nor the National Tax Agency's published conditions state anything about where the seller lives at the time of the sale — that is what the texts say, and we checked both. We did not find a published statement from the agency addressing a non-resident seller directly, so we do not draw a conclusion from the silence in either direction.
• ■How a building's acquisition cost is reduced over the years of ownership. Art.38(2) of the Income Tax Act governs it and we did not work through the tables of useful lives, so this guide states no figures for it. That reduction raises the taxable gain, which is the direction that costs money to guess at.
• ■Whether any tax treaty changes the outcome. We examined Japanese domestic law only. A treaty between Japan and another country can alter which country taxes what, and we read none of them for this guide.
• ■The replacement and loss reliefs. Art.36-2, Art.41-5 and their neighbours are named in Art.35(2) as things that shut the ¥30,000,000 off, and we describe them only in that role. We did not examine their own conditions.
• ■The exit tax is a different regime. Japan has a charge on unrealised gains on financial assets when a long-term resident leaves. It is not the tax on this page, it does not attach to real property, and we did not examine it.

Sources

Every statutory text below was read on 14 August 2026 through the e-Gov law search service maintained by Japan's Digital Agency, at the version in force on that date. The circular and the Q&A were read on the National Tax Agency's own site on the same day. Where a figure is our arithmetic rather than a number printed in a source, we say so both here and in the body.