Renting out property in Japan: landlord guide

Costs of buying

• Budget roughly 6–8% of the price for a resale home: agent fee (up to 3% + ¥60,000 plus consumption tax), registration and licence tax, real estate acquisition tax, stamp tax on the contract and judicial scrivener fees.
• Every year you pay fixed asset tax (1.4% of the assessed value) and, in most cities, city planning tax (up to 0.3%), usually in four instalments.

Buying as a foreigner

• There are no restrictions on foreigners buying land or homes in Japan, and no extra tax for foreign buyers.
• Non-residents who buy property must file a report through the Bank of Japan within 20 days under the Foreign Exchange and Foreign Trade Act (with some exceptions, such as buying a home to live in).
• Purchases in designated areas near defence and other key facilities must be reported in advance.

Official guidance: Ministry of Finance: Foreign Exchange and Foreign Trade Act reports · National Tax Agency

How rental income is taxed

• Rental profit is taxed with your other income: national income tax of 5–45% plus 2.1% reconstruction surtax, and 10% local inhabitant tax for residents.
• Returns cover the calendar year and are filed between 16 February and 15 March.
• Non-residents: tenants that are companies or businesses withhold 20.42% of the rent. You still file a return on the net profit and get any excess back. Non-residents appoint a tax agent (nozei kanrinin) to file for them.

Expenses claimable against rental income

• Fixed asset tax and city planning tax.
• Interest on the loan for the building.
• Depreciation of the building (for example 47 years for a reinforced concrete home, 22 years for a wooden one; shorter for second-hand buildings).
• Management fees, repairs, insurance and agent fees for finding tenants.

Tenancy rules and customs

• Tenants usually pay a deposit (shikikin) of one or two months, sometimes key money (reikin) of up to two months, and in Tokyo a renewal fee of about one month every two years.
• Standard leases strongly protect tenants: a landlord can refuse renewal only with a justifiable reason. A fixed-term lease (teiki shakuya), properly notified in writing, ends without renewal.
• Many landlords use a rent guarantee company instead of a personal guarantor.

Key dates

• 16 February to 15 March: Income tax return for the previous calendar year
• Usually April, July, December and February: Fixed asset tax and city planning tax instalments
• Within 20 days of buying (non-residents): Report the purchase under the Foreign Exchange and Foreign Trade Act

Questions landlords ask

What is a good rental yield in Japan?

Gross yields on Tokyo apartments are commonly around 4–5%, and higher in regional cities. Management fees, repair reserves and fixed asset tax take a noticeable share, so check the net figure in the rental yield calculator for Japan.

Can foreigners buy property in Japan?

Yes, with no restrictions and no extra tax. Non-residents report the purchase through the Bank of Japan within 20 days, and purchases near designated sensitive facilities must be reported in advance.

How is Japanese rent taxed for a non-resident owner?

Business and company tenants withhold 20.42% of the rent. The owner files a return each year through a tax agent, pays tax on the net profit at progressive rates and gets back any excess withholding.

Which expenses can I claim against rental income in Japan?

Fixed asset and city planning tax, loan interest on the building, depreciation, management fees, repairs, insurance and agent fees.

Official sources

• National Tax Agency
• Ministry of Finance: Foreign Exchange and Foreign Trade Act reports
• Ministry of Land, Infrastructure, Transport and Tourism