<Capital Gains>
If you sell real estate for a higher price than you paid for it, you may have what is called a Capital Gain. In Japan, Capital Gains are taxed by the government. Below is a summary of the Capital Gains treatment as it relates to property disposition in Japan.
<Calculation of Capital Gains>
Capital Gains = Amount received – (*Acquisition Cost + **Related Fees)
*Acquisition Cost is generally calculated as Building and Land Acquisition Cost + Related Acquisition Fees – Depreciation on Building
**Related Fees = Brokerage Fees, Registration Costs, Stamp Duties, Land Survey Fee, etc.
Taxable Capital Gains = Capital Gains – (Special Deduction)
*Special Deduction = JPY30,000,000 Deduction for House. When selling a primary residence, you can claim this special deduction.
The maximum deduction amount is JPY30,000,000.
If you own House together with a spouse, you can claim this special deduction up to JPY60,000,000. This special deduction can be applied regardless of how long you have owned the property.
National Tax Agency — Capital Gain Link: https://www.nta.go.jp/taxanswer/joto/3202.htm
<Length of Real Estate Possession>
There are differences in the treatment of Capital Gains depending on the length of property ownership. A “Short Term Transfer” is one in which the property has been held less than 5 years. A “Long Term Transfer” is one in which the property has been owned for more than 5 years. Length of ownership is calculated from Jan 1st of the year of property disposition.
| Length of Ownership | Condition |
| Over 5 years | Long Term Transfer |
| Less than 5 years | Short Term Transfer |
<EXAMPLE>
Acquisition Date: May 1st, 2012
Disposition Date: July 1st, 2017
Calculate as May 1st, 2012 to Jan 1st, 2017.
In the above example the possession length is calculated as 4 years and 8 months. Use Short Term Transfer Tax Rate.
National Tax Agency –Long Term Transfer Link: https://www.nta.go.jp/taxanswer/joto/3208.htm
National Tax Agency –Short Term Transfer Link: https://www.nta.go.jp/taxanswer/joto/3211.htm
<Tax Calculation>
Depends on the use of real estate and lengths of possession, Tax Rate will be varied.
Tax Amount= Taxable Capital Gains x Tax Rate (Income Tax and Resident’s Tax)
| Short Term Transfer | Long Term Transfer | ||
| Length of Ownership | Less than 5 years
|
Longer than 5 years
|
Longer than 10 years
|
| Personal Use Primary Residence | 39.63%
(Income Tax 30.63% / Resident’s Tax 9%) *If applicable, JPY30,000,000 Deduction for House
|
20.315%
(Income Tax 15.315% / Resident’s Tax 5%) *If applicable, JPY30,000,000 Deduction for House |
1. Taxable Capital Gains below JPY60 million portion 14.21% (Income Tax 10.21% / Resident’s Tax 4%)
2. Taxable Capital Gains over JPY60 million portion 20.315% (Income Tax 15.315% / Resident’s Tax 5%) *If applicable, JPY30,000,000 Deduction for House
|
| Non- Personal Use
(Investment Property, Second House) |
39.63%
(Income Tax 30.63% / Resident’s Tax 9%) |
20.315%
(Income Tax 15.315% / Resident’s Tax 5%) |
|
Hi
You mentioned Capital Gains = Amount received – (*Acquisition Cost + **Related Fees), but what if Acquisiton costs were 7 years ago can they be counted as expenses? Especially already treated as expenses when purchase, now we are talking about selling?
Thanks
KC
Thank you very much for your contact.
You can deduct Acquistion Cost at the selling time too. In Japan, government tries to avoid short term transfer, so tax rate is very high. I think it is hard to make capital gain within 5 years from purchase.
Here is more detail information.
*Acquistion Cost—Use higher one from below two cases.
Case 1: Acquisition Cost (Building and Land) –Buildings Depreciation Amount
Case 2: Amount received by transfer x 5%
Hi if I sell my japan house which I lived in 2004-2005 for 2 years am I eligible for the 30 million deduction? My capital gain is around 4 million yen.