Capital Gains Tax on a Japan Property Sale: A Guide for Foreign Owners

How much capital gains tax will you pay when selling property in Japan?

The answer is not calculated simply by applying a tax rate to the sale price.

For an individual property owner, Japanese tax is generally calculated on the taxable gain remaining after deducting the adjusted acquisition cost, eligible selling expenses, and any applicable special deductions from the sale proceeds.

The applicable tax rate then depends largely on how long you have owned the property.

Additional rules may apply when:

• The property was your main home
• You inherited the property
• The original purchase documents are missing
• The property includes a depreciable building
• You live outside Japan
• The buyer must withhold 10.21% of the sale price

EM Labo is a Tokyo-based real estate brokerage, not a tax accounting firm.

We help property owners estimate the likely proceeds from a sale, organize the property information needed for the transaction, and coordinate the selling process in English. When an individual tax calculation or filing is required, we recommend working with a qualified Japanese tax professional.

This guide explains the basic capital gains tax framework for individuals selling property in Japan, particularly foreign owners and overseas owners selling property in Tokyo.

What Is Capital Gains Tax on a Japan Property Sale?

When an individual sells land or a building in Japan, the resulting profit is generally treated as capital gain from the transfer of real estate.

Japanese tax terminology commonly refers to this as real estate transfer income or capital gains from the transfer of land and buildings.

The taxable gain is generally calculated separately from salary, business income, and other ordinary income.

This is known as separate taxation.

The basic structure is:

Taxable capital gain = Sale proceeds − Adjusted acquisition cost − Eligible selling expenses − Applicable special deductions

The tax rate is then applied to the taxable gain rather than directly to the gross sale price.

This distinction is important because two owners selling properties for the same price can have very different tax liabilities.

The result may change depending on:

• The original purchase price
• The cost of purchasing the property
• Building depreciation
• The cost of selling the property
• The ownership period
• Whether a special deduction applies

How Is the Taxable Gain Calculated?

The starting point is the total amount received in connection with the property sale.

From that amount, the seller generally deducts the adjusted acquisition cost and eligible expenses directly related to the sale.

Where a statutory special deduction applies, that deduction is then subtracted from the remaining gain.

Component	General Meaning
Sale proceeds	The amount received from the buyer and certain related settlement amounts
Acquisition cost	The adjusted cost of acquiring the land and building
Selling expenses	Expenses incurred directly to complete or facilitate the sale
Special deduction	A statutory deduction available only when specific requirements are satisfied

The final calculation should be reviewed individually because not every payment associated with owning or selling the property is automatically deductible.

Official information about the calculation is available from Japan’s National Tax Agency on its page explaining how real estate transfer income is calculated.

What Is Included in the Sale Proceeds?

The sale proceeds generally include the price paid by the buyer for the land and building.

Certain settlement amounts paid by the buyer may also need to be considered as part of the seller’s income from the transfer.

For example, Japanese property closings often include an adjustment for fixed asset tax and city planning tax covering the period after the handover date.

Although these amounts are commonly described between the parties as a tax adjustment, their tax treatment should not be assumed based only on the wording used in the settlement statement.

The sale contract, settlement statement, and tax calculation should be reviewed together.

What Can Be Included in the Acquisition Cost?

The acquisition cost generally begins with the amount paid to purchase or construct the property.

Depending on the circumstances, it may also include expenses incurred to acquire the asset.

Possible acquisition-cost items include:

• The original land purchase price
• The original building purchase or construction price
• Brokerage fees paid when purchasing
• Registration-related acquisition expenses
• Certain taxes paid at acquisition
• Legal or professional fees directly related to the acquisition
• Equipment and improvement costs
• Capital improvements made after purchase

Routine maintenance and ordinary repairs are not necessarily treated in the same way as capital improvements.

The original purchase agreement, closing statement, brokerage invoices, registration receipts, and renovation invoices can therefore have a major effect on the final taxable gain.

Japan’s National Tax Agency explains the general acquisition-cost rules on its page concerning items included in the acquisition cost.

Why Does Building Depreciation Matter?

Land and buildings are treated differently when calculating the acquisition cost.

Land is not normally depreciated.

A building, however, loses part of its tax acquisition cost over the ownership period through a depreciation adjustment.

This means the original building purchase price is not normally deducted in full when the property is later sold.

The adjusted building acquisition cost is generally calculated by subtracting the applicable depreciation amount from the original building cost.

Adjusted building acquisition cost = Original building cost − Depreciation amount

As a result, a property can have a taxable gain even when the total sale price appears close to or below the original purchase price.

This is particularly relevant for:

• Older condominiums
• Detached houses held for many years
• Rental properties
• Properties purchased with a large building-value allocation

The appropriate depreciation calculation depends on factors such as the building structure, age, use, acquisition date, and allocation between land and building.

A tax professional should calculate this amount when the potential tax is material.

What Happens If the Original Purchase Price Is Unknown?

Foreign and inherited-property owners sometimes no longer have the original purchase agreement or acquisition records.

When the actual acquisition cost cannot be established, Japanese tax rules generally allow a deemed acquisition cost equal to 5% of the sale proceeds.

For example, if a property is sold for JPY 60 million and no acquisition cost can be established, the deemed acquisition cost may be only JPY 3 million.

This can produce a much larger taxable gain than the owner expected.

Missing purchase records can be expensive.

Before relying on the 5% deemed acquisition cost, search for the original agreement, bank records, developer documents, prior tax filings, inheritance records, and other evidence that may support the actual acquisition cost.

See the National Tax Agency’s official explanation of the deemed acquisition cost when the original cost is unknown.

Which Selling Expenses Can Be Deducted?

Expenses incurred directly to sell the property may generally be deducted from the sale proceeds when calculating the gain.

Possible selling expenses include:

• Real estate brokerage fees
• Survey costs required for the sale
• Stamp duty on the sale agreement
• Tenant relocation payments made to complete the sale
• Demolition costs when a building is demolished to sell the land
• Certain contract-cancellation costs incurred to complete a more favorable sale

Not every expense incurred while owning or preparing the property is a selling expense.

Items that generally require particular care include:

• Ordinary repair costs
• Routine maintenance
• Fixed asset tax
• Condominium management fees
• Moving expenses
• The cost of collecting an unpaid sale price

Some costs may be treated as acquisition costs, selling expenses, ordinary expenses, or non-deductible personal expenses depending on their purpose.

The National Tax Agency provides examples on its page explaining which costs qualify as selling expenses.

Long-Term and Short-Term Capital Gains Tax Rates

For an individual seller, Japan applies different tax rates depending on whether the property is classified as a long-term or short-term holding.

The standard rates commonly quoted for a Japanese tax resident are as follows.

Classification	Income Tax	Reconstruction Tax	Resident Tax	Commonly Quoted Combined Rate
Long-term gain	15%	0.315%	5%	20.315%
Short-term gain	30%	0.63%	9%	39.63%

The reconstruction tax is calculated as 2.1% of the national income-tax amount.

The combined figures above assume the standard inhabitant-tax component applies. They should not automatically be used as the final tax rate for a seller who is already a non-resident of Japan.

Non-resident sellers should have their national and local tax position confirmed individually.

Official rate information is available from the National Tax Agency’s pages on long-term real estate gains and short-term real estate gains.

How Does Japan’s Five-Year Ownership Rule Work?

The five-year test does not simply count five years from the purchase date to the closing date.

The classification is based on the ownership period as of January 1 of the year in which the sale takes place.

• Long-term gain: The property has been owned for more than five years as of January 1 of the sale year.
• Short-term gain: The property has been owned for five years or less as of January 1 of the sale year.

For a property sold during 2026:

• A property acquired on or before December 31, 2020 is generally treated as a long-term holding.
• A property acquired on or after January 1, 2021 is generally treated as a short-term holding.

This can create a surprising result.

For example, a property purchased in February 2021 and sold in December 2026 has been owned for almost six years in ordinary terms. However, it was not owned for more than five years as of January 1, 2026, so it is generally still classified as a short-term holding for that sale.

The contract date and the date recognized as the tax-transfer date should also be confirmed for the particular transaction.

Example Capital Gains Tax Calculation

Consider a simplified example involving an individual seller who is a Japanese tax resident.

Sale proceeds	JPY 80,000,000
Adjusted acquisition cost	JPY 48,000,000
Eligible selling expenses	JPY 3,000,000
Special deduction	None

The taxable gain would be:

JPY 80,000,000 − JPY 48,000,000 − JPY 3,000,000 = JPY 29,000,000

If the property qualifies as a standard long-term holding and the commonly quoted combined resident rate applies:

JPY 29,000,000 × 20.315% = approximately JPY 5,891,350

If the same gain is classified as short-term:

JPY 29,000,000 × 39.63% = approximately JPY 11,492,700

This example is simplified.

The actual calculation may differ because of depreciation, special deductions, ownership allocation, non-resident status, prior use of the property, and other circumstances.

The JPY 30 Million Main-Home Deduction

A person selling a qualifying main home may be able to deduct up to JPY 30 million from the capital gain.

This deduction may be available regardless of whether the ownership period is long-term or short-term, provided all statutory requirements are met.

For example, if the gain before the deduction is JPY 25 million and the full main-home deduction applies, the taxable gain may be reduced to zero.

Important conditions can include:

• The property was genuinely used as the seller’s home
• The buyer is not a spouse, close family member, or another specially related party
• The seller has not used conflicting special tax treatments within the relevant period
• The required tax return and supporting documents are submitted

Using a property only temporarily to create the appearance of a main residence does not normally satisfy the purpose of the rule.

The deduction is not applied automatically at closing. The seller normally needs to claim the treatment through the appropriate Japanese tax filing.

Review the National Tax Agency’s requirements for the JPY 30 million main-home deduction.

Selling a Former Home After Moving Overseas

Foreign owners often move out of Japan and sell their former Tokyo home later.

A former home may still qualify for the JPY 30 million deduction when it is sold by the end of the year containing the date three years after the owner stopped living there, provided the other requirements are met.

For example, when an owner moves out during 2024, the relevant sale deadline may extend through December 31, 2027.

The exact date, use of the property after moving out, related-party rules, and interaction with other tax benefits must be checked.

Because the deadline can affect the tax result substantially, former homeowners should review the potential treatment before deciding when to list the property.

See the National Tax Agency’s guidance on selling a former main home.

Capital Gains Tax on an Inherited Property Sale

Inheritance does not normally reset the acquisition cost to the property’s market value on the inheritance date.

As a general rule, the heir takes over the deceased owner’s original acquisition cost and acquisition date.

This means:

• The deceased owner’s purchase records may be needed
• The deceased owner’s ownership period generally carries over
• The gain may be large when the property was purchased many years ago
• The 5% deemed acquisition cost may become relevant if the historical cost cannot be established

Certain inheritance-tax amounts may be added to the acquisition cost when the property is sold within a specified period and the statutory requirements are met.

A separate special deduction may also be available for certain inherited vacant homes.

Inherited-property tax calculations can become complicated, particularly where several heirs, incomplete records, or a deceased owner’s former home are involved.

Official general information is available from the National Tax Agency regarding the acquisition cost and ownership period of inherited property.

Capital Gains Tax for Non-Resident Property Sellers

A person living overseas may still be required to pay Japanese tax when selling property located in Japan.

Japanese real estate gain is generally treated as Japanese-source income.

The calculation of the gain generally follows the same core structure:

Sale proceeds − Acquisition cost − Selling expenses − Applicable deduction

However, a non-resident seller must also consider:

• Whether 10.21% will be withheld from the gross sale price
• Whether a Japanese tax return is required
• Whether a tax agent must be appointed in Japan
• Whether Japanese inhabitant tax applies to the individual circumstances
• Whether tax must also be reported in the seller’s country of residence
• Whether a tax treaty or foreign tax credit may be relevant

Foreign nationality does not automatically mean that a seller is a non-resident.

A foreign national living in Tokyo may be a Japanese tax resident, while a Japanese citizen living overseas may be a non-resident.

The seller’s tax status should therefore be established independently from nationality.

The 10.21% Non-Resident Withholding Rule

When a non-resident sells Japanese real estate, the buyer is generally required to withhold 10.21% of the gross purchase consideration.

This withholding is calculated on the sale price, not the capital gain.

For example, if the property is sold for JPY 100 million and withholding applies, JPY 10.21 million may be withheld from the amount otherwise payable to the seller.

An exception may apply when all the following conditions are satisfied:

• The buyer is an individual
• The buyer acquires the property for the buyer’s own residence or a relative’s residence
• The total consideration is JPY 100 million or less

Withholding may therefore remain relevant when:

• The buyer is a company
• The buyer purchases the property as an investment
• The sale consideration exceeds JPY 100 million

Withholding Is Not the Final Capital Gains Tax

The amount withheld is an advance payment toward the seller’s Japanese income-tax liability.

It is not necessarily equal to the final tax calculated on the gain.

After filing a Japanese tax return, the seller may:

• Receive a refund of part of the withholding
• Owe additional tax
• Have a final liability close to the amount withheld

The National Tax Agency explains these rules on its pages concerning non-residents selling Japanese property and withholding by the buyer.

Selling property while living overseas?

Do not calculate your closing proceeds using the sale price alone. Mortgage repayment, selling expenses, and possible 10.21% withholding should be considered before you accept an offer.

Discuss Your Tokyo Property Sale

Do You Need to File a Japanese Tax Return?

A seller with a taxable gain will generally need to file a Japanese income-tax return for the year of the sale.

A return may also be necessary when:

• Claiming the JPY 30 million main-home deduction
• Claiming a reduced tax rate
• Recovering non-resident withholding
• Claiming a property-sale loss treatment
• Reporting an inherited-property sale

The normal filing period is generally from February 16 to March 15 of the following year, subject to calendar adjustments and applicable procedures.

A non-resident who needs to complete Japanese tax procedures may need to appoint a tax agent in Japan.

EM Labo does not prepare or file tax returns. We can, however, coordinate the property information and transaction documents needed by an appropriate tax professional.

What If You Sell the Property at a Loss?

A property-sale loss is generally not automatically deductible from salary or other ordinary income.

Special loss-offset or carryforward rules may apply to certain qualifying main-home sales.

These rules can depend on:

• Whether the property was the seller’s home
• The ownership period
• Whether a mortgage remains
• Whether a replacement home is purchased
• The seller’s income
• The timing of the sale and new purchase

A seller expecting a loss should obtain tax advice before completing the transaction because some relief requires specific conditions and filings.

Documents to Keep Before Selling

The tax calculation depends heavily on documentary evidence.

Before selling, gather as many of the following records as possible:

• The original purchase agreement
• The original closing statement
• Brokerage-fee invoices from the purchase
• Registration and judicial-scrivener receipts
• Real estate acquisition tax records
• Construction contracts
• Renovation and capital-improvement invoices
• Inheritance documents
• Prior depreciation schedules
• The new sale agreement
• Selling-agent invoices
• Survey, demolition, and tenant-relocation receipts
• Non-resident withholding documentation

Documents stored overseas should be located before the property is placed on the market.

Waiting until after closing can make it difficult to support the actual acquisition cost or claim eligible expenses.

How to Estimate Your Net Sale Proceeds

Capital gains tax is only one of the amounts that reduce the cash an owner receives from a property sale.

A practical selling decision should begin with an estimated net-proceeds statement.

Estimated net proceeds = Sale price − Mortgage repayment − Selling costs − Withholding − Estimated final tax

Possible deductions from the gross sale price include:

• The outstanding mortgage
• Real estate brokerage fees
• Judicial scrivener fees
• Mortgage cancellation costs
• Stamp duty
• Survey or demolition expenses
• Cleaning and removal costs
• Non-resident withholding
• Capital gains tax
• International remittance expenses

Withholding and final tax should not be counted twice.

Where 10.21% has been withheld, the amount is generally credited against the final national income-tax calculation through the seller’s tax return.

A real estate agent can estimate the transaction-related costs and likely sale price. A tax professional should estimate the final tax.

How EM Labo Supports Property Sellers

EM Labo is a licensed real estate brokerage based in Tokyo.

We support foreign and international property owners selling homes, condominiums, land, and investment properties in Tokyo and the wider Kanto area.

Our real estate support may include:

• An initial consultation in English
• Property investigation and valuation
• Comparable transaction analysis
• A recommended selling price and marketing strategy
• Japanese and English property marketing
• Coordination with other Japanese brokerage companies
• Viewing management
• Offer evaluation and negotiation
• Estimated transaction-cost and net-proceeds calculations
• Mortgage repayment coordination
• English explanations of the sale documents
• Remote-sale support for overseas owners
• Closing and handover coordination
• Introductions to English-speaking tax and registration professionals

What EM Labo Cannot Determine

EM Labo is not a tax accounting firm and cannot determine:

• Your final taxable capital gain
• Your depreciation amount
• Your personal tax residency
• Whether a special deduction applies
• Your foreign-country tax obligations
• Your final refund or additional payment after withholding

Our role is to manage the property sale and provide the documents and transaction information needed for professional tax review.

Learn more about:

• Selling property with EM Labo
• EM Labo’s service fees
• Selling property in Japan as a foreigner
• Selling Tokyo property while living overseas

Frequently Asked Questions

Below are common questions about capital gains tax on Japanese property sales.

Is capital gains tax calculated on the property’s sale price?

No. The tax is generally calculated on the taxable gain after deducting the adjusted acquisition cost, eligible selling expenses, and applicable special deductions from the sale proceeds.

What are the capital gains tax rates for Japanese property?

For an individual Japanese tax resident, the commonly quoted standard combined rates are approximately 20.315% for long-term gains and 39.63% for short-term gains.

Non-resident and special-case calculations should be reviewed individually.

When is a property treated as a long-term holding?

The property must have been owned for more than five years as of January 1 of the year in which it is sold.

If I sell property in 2026, which purchases are long-term?

A property acquired on or before December 31, 2020 is generally classified as long-term for a 2026 sale. A property acquired on or after January 1, 2021 is generally classified as short-term.

Can I deduct the original purchase price?

Generally, yes, as part of the acquisition cost. However, the building portion normally needs to be reduced by the applicable depreciation amount.

What happens if I cannot find the original purchase agreement?

You may be able to use 5% of the sale proceeds as a deemed acquisition cost. Because this can produce a large taxable gain, other evidence of the actual acquisition cost should be investigated first.

Can I deduct renovation costs?

Capital improvements may form part of the acquisition cost. Routine repairs and maintenance may be treated differently. The invoices and purpose of the work should be reviewed.

Can I deduct the real estate brokerage fee?

The brokerage fee paid for the sale is generally treated as an eligible selling expense. The fee paid when purchasing may form part of the acquisition cost.

Can I deduct fixed asset tax and condominium fees?

Routine property taxes, management fees, and maintenance costs are not generally treated as direct selling expenses merely because they were paid before the sale.

Is there a JPY 30 million deduction for selling a home?

A qualifying main-home sale may be eligible for a deduction of up to JPY 30 million, subject to detailed conditions and filing requirements.

Can the main-home deduction apply after I move overseas?

It may still apply when the former home is sold within the statutory deadline and the other conditions are satisfied.

Do foreign owners pay a different capital gains tax rate?

Foreign nationality alone does not determine the tax rate. Tax residency, ownership period, use of the property, and applicable deductions are more important.

What is the 10.21% tax on non-resident property sales?

It is generally withholding from the gross sale consideration paid to a non-resident seller. It is not necessarily the seller’s final capital gains tax.

Can the 10.21% withholding be refunded?

Part or all of the withholding may be refunded when the seller files a Japanese tax return and the final national income-tax liability is lower than the amount withheld.

Does EM Labo calculate capital gains tax?

EM Labo can help organize the sale price, purchase information, selling costs, mortgage balance, and transaction documents. The final tax calculation should be completed by a qualified tax professional.

Discuss Your Tokyo Property Sale in English

Capital gains tax can substantially affect the amount you retain after selling property in Japan.

Before deciding on a listing price or accepting an offer, you should understand:

• The property’s realistic market value
• The adjusted acquisition cost
• The effect of building depreciation
• The long-term or short-term classification
• Potential special deductions
• The remaining mortgage balance
• Expected selling expenses
• Possible non-resident withholding

EM Labo supports property owners selling real estate in Tokyo and the wider Kanto area.

Tell us the property address, purchase date, original purchase price, current occupancy, mortgage status, desired schedule, and country of residence. Our English-speaking team will help you assess the real estate transaction and identify the information needed for professional tax review.

Considering Selling Property in Tokyo?

Speak with EM Labo about valuation, marketing, selling costs, estimated proceeds, overseas procedures, and coordination with Japanese professionals.

Request a Property Consultation

Learn more about our property sales support and service fees.

The information in this article is provided for general informational purposes and does not constitute tax, legal, accounting, investment, or financial advice. Tax rates, residency, depreciation, acquisition costs, deductions, withholding, and filing requirements depend on the individual seller, property, and year of sale. EM Labo is a real estate brokerage and is not a tax accounting firm. Please consult a qualified professional regarding your individual circumstances.