Beyond the contract price, several taxes and transaction costs arise when buying real estate in Japan. If you overlook them, your cash plan and projected returns can slip quickly. Below is a practical breakdown of three key taxes that typically come into play at acquisition: Registration and License Tax, Real Estate Acquisition Tax, and Consumption Tax.

1. Registration and License Tax

This national tax is due when you register title (ownership transfer) or a mortgage. The standard rate for an ownership transfer is 2.0% of the fixed asset tax assessed value. Certain residential uses may qualify for temporary reduced rates such as 1.5% or even 0.3%, subject to specific criteria.

Example: With an assessed building value of ¥30 million, the tax portion alone could be roughly ¥600,000. Professional fees and eligibility for reductions will affect the final total.

2. Real Estate Acquisition Tax

Imposed by the prefectural government after you acquire land or buildings. A tax bill typically arrives several months after closing (often 6–12 months). The base statutory rate is 4.0%, but qualifying residential property may be reduced to around 3.0%. Because the tax is calculated on the government’s assessed value—not necessarily your purchase price—be prepared for differences.

3. Consumption Tax

Land transfers are exempt. The building portion is generally subject to 10% consumption tax, but treatment depends on the seller:

Individual seller: In many cases, the transaction is treated as non-taxable even for the building.

Corporate/developer seller or new construction: Consumption tax applies to the building price; confirm the amount shown in the contract.

Practical Tips

Many reductions require paperwork and deadlines—coordinate early with a judicial scrivener (shiho-shoshi) and tax adviser.

Don’t budget taxes as a flat percentage of the purchase price; always model using the assessed values.

Purchasing through a company can sometimes allow input tax credits (effectively a refund) for consumption tax, but qualification standards—including the invoice system—have tightened.

Takeaway

Acquisition taxes hit at different times and from different authorities, so cash scheduling matters. Clarify what applies, estimate amounts using assessed values, and confirm timing before you close. Tax law changes—always verify the latest rules with qualified professionals.