Purchasing real estate in Japan can be a rewarding investment, whether you’re looking for a traditional Kyoto machiya or a modern property. However, Japan’s property laws and regulations can be complex, especially for foreign buyers. Here are key things to be aware of when buying properties in Japan to ensure a smooth transaction.
1. You Need the Physical Property Deed to Sell the Property
The property deed, known as “登記簿謄本” (Tōkibo Tōhon) in Japanese, is a crucial legal document proving ownership of real estate. It contains important details such as:
- Owner’s name
- Property location
- Property size
- Any existing mortgages or liens
This deed is issued by the Legal Affairs Bureau after the ownership is registered. It is essential for selling the property, as it confirms that the true owner has the intention to sell. If lost, a new certificate of title must be issued before the sale can proceed. Keeping this document safe is a critical part of property ownership in Japan.
2. Your Registered Address Must Match Your Current Address
When selling property in Japan, your registered address on the certified copy of the real estate register (Japanese: 登記簿謄本) must match your current address. If your current address differs from the one on the property registration, you must update it before transferring ownership. This process requires official proof of moving from the previous registered address to the new one.
Without this update, ownership changes cannot be conducted, potentially delaying the transaction. Foreign sellers should ensure they have proper documentation to complete this process smoothly.
3. Withholding Tax Requirement for Non-Resident Sellers
If a non-resident sells property in Japan, a withholding tax applies. The process varies depending on the buyer’s residency status:
When the Buyer is a Resident of Japan:
The buyer must withhold 10.21% of the sale price as income tax and special reconstruction income tax on behalf of the non-resident seller.
This amount must be paid to the tax office by the 10th of the month following the closing date.
The buyer needs to obtain a payment form from the tax office linked to their residence.
When Both Seller and Buyer are Non-Residents:
A licensed real estate agency (such as Shiki Real Estate) will withhold 10.21% of the sale price and submit the tax to the government.
The agency will obtain the necessary payment form from the tax office associated with its address.
Tax Refund Option
While the 10.21% withholding tax is deducted, sellers can file a capital gains tax return through a tax agent (tax accountant). This allows for an accurate calculation of taxable income, accounting for both income and costs associated with the sale. If the actual tax owed is lower than the withheld amount, sellers may be eligible for a refund. Properties sold within the current year can be reported in the next year’s tax filing.
For further details, refer to Japan’s National Tax Agency guidelines (in Japanese)
Why Work with Shiki Properties?
Navigating Japan’s property regulations can be challenging, but Shiki Real Estate specializes in assisting both domestic and international buyers in purchasing and managing Kyoto properties. Whether you’re buying or selling a machiya for personal use or as an investment, our experienced team will guide you through the process, ensuring compliance with all legal requirements.
If you’re considering purchasing a property in Japan, contact Shiki Properties today for expert advice and tailored real estate solutions!
Get in touch with us to make your property investment dream a reality!
