Japan’s real estate market offers attractive opportunities for international investors seeking stable returns and asset diversification. However, navigating the country’s tax regulations and legal requirements can feel complex—especially for first-time buyers or investors unfamiliar with Japan. That’s where we come in. With deep local expertise and a client-first mindset, we help overseas investors invest in Japanese property with clarity and peace of mind.
Practical Investment Approaches for Foreign Investors
While Japan offers sophisticated investment structures like the GK-TK (Godo Kaisha–Tokumei Kumiai) and TMK (Tokutei Mokuteki Kaisha), these can be costly and overly complex for mid-sized investors. At our firm, we focus on two straightforward, efficient approaches:
- Direct investment by foreign individuals
- Investment through a Japanese company (Kabushiki Kaisha or Godo Kaisha)
1. Investing as an Individual: Tax Considerations for Direct Property Ownership
■ Withholding Tax on Rental Income Payments
Rental income paid to non-resident investors is subject to a 20.42% withholding tax (WHT) at the time of payment by the property management company or tenant. This tax is withheld at source and remitted to the Japanese tax authorities.
■ Individual Income Tax on Rental Income
Rental income from Japanese property is classified as Japan-sourced income and is subject to progressive income tax rates ranging from 5% to 45%, even if WHT has already been applied at the time of payment.
The amount withheld (WHT) can be credited against the final tax liability in the annual tax return.
Tax filing is required annually, and non-residents must appoint a tax agent in Japan.
⚠ Non-residents are generally exempt from local inhabitant tax.
■ Capital Gains Tax
When the property is sold:
- Held 5 years or less: taxed at 30.63%
- Held over 5 years: taxed at 15.315%
■ Real Estate Acquisition Tax
A 4% tax generally applies when acquiring property. Lower rates may apply for qualifying residential properties.
2. Using a Japanese Company to Invest: How It Works and What to Know
Many investors choose to establish a Kabushiki Kaisha (KK) or Godo Kaisha (GK) to hold their Japanese real estate.
■ Corporate Taxation
- Income up to JPY 8 million: 15%
- Income exceeding JPY 8 million: 23.2%
- Effective tax rate (including local taxes): approx. 30%–35%
■ Withholding Tax on Dividends
Dividends to overseas shareholders are subject to 20.42% withholding tax, unless reduced or exempted under a tax treaty.
This withholding is considered a final tax, and non-resident investors are generally not required to file an individual tax return for this income.
■ Tax on Property Sales
Profits from real estate sales are treated as regular corporate income and taxed accordingly.
■ Incorporation/Registration Tax and Costs
- KK: 0.7% of capital (minimum JPY 150,000)
- GK: flat JPY 60,000
- Other costs include notary and legal professional fees.
■ Real Estate Acquisition Tax
Same as noted for individual investors: standard rate 4%, with potential reductions.
How We Help – Comprehensive Tax Support for Foreign Investors
Our team provides full-scope support for overseas investors, including:
- Strategic structuring advice for real estate investment
- Appointment as tax agent and income tax filing for individuals
- Incorporation support, with registration by our legal partners
- Monthly, annual, and transactional tax filings for corporations
- Tax treaty consultation and application assistance
- Introduction to reliable local real estate agents and service providers
⚠ Please note: We do not offer assistance with bank account opening or visa services but can refer you to qualified professionals upon request.
Your Trusted Tax Partner in Japan
Successful real estate investment begins with trusted advice. We help foreign investors minimize tax risks, stay compliant with local laws, and access Japan’s property market with confidence.
We offer English-language online consultations at a rate of JPY 50,000 (plus tax) per hour per session. Let’s discuss how we can support your investment goals in Japan.
Contact：info@japan-tax.jp
Disclaimer
This publication is intended for informational purposes only and does not constitute tax, legal, or investment advice.
Our comments are based on our interpretation of the Japanese tax laws and regulations in effect as of the date of this document.
We have not obtained any rulings or confirmations from the Japanese National Tax Agency or other regulatory authorities in relation to the matters discussed herein.
Accordingly, no assurance can be given that the views expressed would be accepted by the authorities in the event of an audit or examination.
We accept no responsibility to update or revise this material to reflect subsequent changes in law, regulations, or interpretation.
