Capital Gains Tax on Japanese Property

1. The rates

• Long-term (> 5 years): 20.315% (15.315% national + 5% resident)
• Short-term (≤ 5 years): 39.63% (30.63% national + 9% resident)

2. The 5-year clock — read this carefully

The clock runs from January 1 of the year of the 5th anniversary, not from purchase date. Practical rule:

• Bought in 2020 → long-term from January 1, 2026
• Bought in 2021 → long-term from January 1, 2027

Selling in December 2025 vs January 2026 for a 2020 purchase can double your tax bill on the exact same gain. Time exits around calendar-year turns.

3. Basis calculation

Taxable gain = Sale price
             − Selling costs (brokerage, stamp duty)
             − Acquisition cost (purchase + acquisition fees)
             + Accumulated depreciation ← recaptured

Depreciation shelters income during the hold, but it reduces basis on exit. A property bought for ¥25M with ¥8M accumulated depreciation has adjusted basis of ¥17M. If sold at ¥25M, the tax office treats that as an ¥8M gain — even though you didn't make market appreciation.

4. Non-resident 10.21% withholding on sale

The buyer withholds 10.21% of the gross sale price at closing (waived under ¥100M with owner-occupier buyer). You then file to compute actual tax and reclaim the excess. If your true gain is small or negative, the refund is substantial — but you wait until March of the following year.

5. Tax residency matters

Your tax status on the sale date determines the rate structure. Becoming a Japan tax resident before selling changes the calculation and may open the residency-loss deduction for a personal home (not investment property).

6. Planning

Combine exit timing with depreciation runway (see exit strategy): use short-schedule depreciation while holding, then sell right after year 5 for the long-term rate. This is the standard overseas-investor playbook.