In short term rental investment, not only operating profit but also the handling of consumption tax and lodging tax directly affects annual cash flow. This article focuses on these two taxes as of 2025, using clear thresholds and practical numbers.

1. When Consumption Tax Applies

Short term rental revenue is generally treated as taxable sales. Many operators start as tax exempt businesses, with the key threshold being taxable sales of 10 million yen or less in the base period.

For example, if first year revenue is 8 million yen and second year revenue is 12 million yen, the operator is typically tax exempt for the first and second years and becomes a taxable business from the third year. Once taxable, 10% consumption tax is collected on sales and offset by input tax credits such as cleaning and supplies.

2. Lodging Tax Structure and Regional Differences

Lodging tax is a local tax set by each municipality. Typical examples are

Tokyo 100 yen for stays of 10000 yen or more and 200 yen for 15000 yen or more

Osaka 100 yen to 300 yen depending on room rate

This tax is collected from guests and remitted to the city, and must be managed separately from revenue. Failure to collect or remit leads directly to regulatory and operational risk.

3. Practical Numerical Case

Assumptions

Monthly revenue 1.2 million yen

Annual revenue 14.4 million yen

Operation in Tokyo

From the third year, 10% consumption tax applies, resulting in 1.44 million yen of collected tax annually before input credits.

If monthly stays are 120 nights with an average 200 yen lodging tax, the monthly lodging tax is 24000 yen and the annual total is 288000 yen.

4. Common Operational Risks

Consumption tax often feels like part of revenue and may be mistakenly spent, causing cash shortages at tax payment time. Lodging tax is not always collected by booking platforms and may need to be collected on site by the operator. Separate cash management for both taxes is essential for stable operations.

Takeaway

Short term rental revenue is subject to consumption tax, and once sales exceed 10 million yen, the 10% tax applies. Lodging tax is a fixed regional levy collected separately from revenue. In short term rental investment, managing tax flows numerically is just as important as managing operating profit.