Capital Gains Tax on Japan Property Sales for Foreign Owners

Selling property in Japan as a foreign owner triggers one of the most important tax obligations you will face: capital gains tax (CGT). Whether you are a long-term resident, a non-resident selling from abroad, or an investor looking to exit your position, understanding exactly how Japan taxes property sale profits can save you hundreds of thousands of yen — or prevent an unexpected tax bill that catches you off guard.

This guide covers everything foreign property owners need to know about capital gains tax in Japan: rates, calculation methods, exemptions, non-resident withholding rules, and how to stay compliant from start to finish.

How Japan Calculates Capital Gains Tax on Property

Japan taxes capital gains from real estate as a separate category of income, calculated by subtracting acquisition costs and transfer expenses from the sale price:

Taxable Capital Gain = Sale Price − (Acquisition Cost + Transfer Expenses)

Acquisition costs include:

• Original purchase price of the property and land
• Purchase-related fees (registration tax, stamp duty, agent commission at time of purchase)
• Renovation, remodeling, or major improvement costs (not routine repairs)

Transfer expenses include:

• Real estate agent commission on the sale (typically 3% + ¥60,000 + tax)
• Legal and administrative fees
• Demolition costs if applicable

The resulting taxable gain is then taxed at a rate that depends on how long you have held the property.

Capital Gains Tax Rates: Short-Term vs Long-Term

The single most important factor in your Japan property CGT bill is the 5-year ownership rule. Japan draws a sharp distinction between short-term and long-term holdings:

*The 10-year reduced rate applies only to primary residences in combination with the ¥30M deduction (see below).

Critical timing note: The 5-year threshold is not measured from the date of purchase to the date of sale — it is measured by January 1 of the year in which you sell. If you purchased in February 2020 and sell in January 2026, the property is treated as a long-term asset because more than five years have passed as of January 1, 2026. Selling in December 2025 instead would make it short-term, nearly doubling your tax rate. This single timing decision can mean a difference of ¥5–6 million or more in taxes on a typical Tokyo property sale.

Non-Resident Sellers: Withholding Tax Rules

Foreign owners who have left Japan and become non-residents face an additional layer of complexity: buyer withholding tax.

The 10.21% Withholding Rule

When a non-resident sells Japanese property, the buyer is generally required to withhold 10.21% of the total sale price and remit it directly to the Japanese tax authority (NTA). This is not a tax on your profit — it is calculated on the gross sale price, which can result in a significant upfront cash demand.

Example: If you sell a property for ¥50 million, the buyer withholds ¥5.105 million (10.21%) and pays you only ¥44.895 million at closing. You later file a tax return and receive a refund if your actual CGT liability is lower than the amount withheld.

When Withholding Is Waived

The withholding requirement does not apply if both of the following conditions are met:

1. The buyer is an individual purchasing the property for their own residential use
2. The total sale price is ¥100 million or less

This exemption covers many standard residential transactions but does not apply to investment property sales, commercial property, or transactions above the ¥100M threshold.

Tax Agent Requirement for Non-Residents

Non-resident sellers must appoint a tax agent (zeirishi or zeimu dairi-nin) — a person with a registered address in Japan — to handle your tax filings on your behalf. This is a legal requirement, not optional. Your tax agent will file your final return, calculate the actual tax due, and process any refund from excess withholding.

For more context on managing your property from overseas, see our guide on property management for overseas owners in Japan.

Major Exemptions That Can Reduce Your Tax Bill

1. The ¥30 Million Primary Residence Deduction

If the property you are selling was your primary residence (main home), you can deduct up to ¥30 million from your taxable capital gain before applying the tax rate. This is the most powerful exemption available and can eliminate CGT entirely for most mid-range residential sales.

Requirements:

• The property must have been your primary residence (not rental, not vacation property)
• If you have already moved out, you must sell within 3 years of vacating
• You cannot use this deduction more than once every 2 years
• The sale cannot be to a close relative (spouse, children, parents)

2. Reduced Rate for 10+ Year Primary Residences

If you have owned your primary residence for more than 10 years (as of January 1 of the sale year), you qualify for an enhanced reduced tax rate:

• Capital gains up to ¥60 million: taxed at approximately 14.21% (10.21% income tax + 4% resident tax)
• Capital gains above ¥60 million: taxed at the standard long-term rate of 20.315%

This benefit stacks with the ¥30 million deduction. In practical terms, you can deduct ¥30 million first, then apply the 14.21% rate to the remaining gain up to ¥60 million. For a long-term primary residence owner, the combination of these two benefits can substantially reduce or eliminate any tax liability.

3. Loss Carryover and Offset

If you sell your primary residence at a loss, Japan's tax rules allow you to offset that loss against your regular income in the same year and carry it forward for up to 3 years. This is an unusual provision that effectively lets you write off real estate losses against your salary income, providing meaningful tax relief in a down market.

Residency Status and Its Impact on Your Tax Obligations

Your tax treatment in Japan as a foreign property owner depends heavily on your residency status at the time of sale:

Foreigners who have lived in Japan for 5 or more years within the last 10 years are classified as permanent residents for tax purposes, regardless of visa status. This means they are subject to Japanese taxation on their worldwide income and assets, not just Japan-source income. If you fall into this category and are selling a property abroad while also selling in Japan, consult a cross-border tax specialist.

For more on how your visa and residency status affects your property rights and obligations, see our visa and residency guide for property buyers in Japan.

Step-by-Step: Filing Capital Gains Tax as a Foreign Property Seller

Step 1: Gather Your Documentation

You will need:

• Original purchase contract and receipts
• Records of all improvement and renovation expenditures
• Sale contract
• Real estate agent commission invoices
• Any applicable legal or administrative fee receipts

Step 2: Calculate Your Net Gain

Apply the formula: Taxable Gain = Sale Price − (Acquisition Cost + Acquisition Fees + Renovation Costs + Transfer Expenses)

If your original acquisition cost records are incomplete (common for inherited properties), Japan allows a deemed cost of 5% of the sale price as a fallback, though this often results in a larger taxable gain.

Step 3: Determine Your Tax Rate and Exemptions

• Check ownership period as of January 1 of the sale year
• Verify if primary residence exemption applies
• Assess withholding status (resident vs non-resident)

Step 4: File Your確定申告 (Kakutei Shinkoku) Tax Return

Capital gains from property sales must be reported in the annual income tax return (kakutei shinkoku) for the year of sale. The filing deadline is March 15 of the following year.

Non-residents must file through their appointed tax agent. Residents file directly or through a tax accountant. The return must include Form B and the separate property transfer income calculation form.

Step 5: Pay Any Remaining Tax (or Receive a Refund)

If withholding occurred (non-resident sales), the NTA will calculate your actual liability against the withheld amount and either issue a refund or request additional payment.

Double Taxation: What Foreign Nationals Need to Know

Many foreign nationals worry about being taxed twice — once in Japan and once in their home country. Japan has tax treaties with numerous countries (the US, UK, Australia, Germany, France, and many others) that typically allow you to credit Japanese taxes paid against your home country tax liability.

For US citizens and green card holders, selling Japanese property triggers US reporting obligations regardless of residency, including:

• Capital gains reporting on Form 1040 Schedule D
• Potential FBAR reporting if proceeds are held in Japanese accounts exceeding $10,000
• Foreign tax credit (Form 1116) to offset double taxation

Always consult a tax professional familiar with both Japanese and your home country's tax law before selling. The interaction between tax systems can be complex, and errors in reporting can result in penalties in both jurisdictions.

For broader context on Japan's property market and when selling might make sense, the team at Gaijin Buy House has an excellent analysis of selling vs renting when leaving Japan that covers the financial trade-offs in detail.

Practical Tips for Foreign Sellers to Minimize Tax

1. Time your sale carefully. If you are close to the 5-year threshold, waiting until after January 1 of the following year can cut your effective tax rate nearly in half.

1. Keep all renovation receipts. Every yen spent on improving the property (not just maintenance) reduces your taxable gain. Renovation receipts from years ago are still valuable — find them before you sell.

1. Use the ¥30M primary residence deduction if eligible. Do not sell within 3 years of vacating without calculating whether this exemption still applies.

1. Appoint a tax agent before the sale closes. Non-residents who fail to have an appointed tax agent in place at the time of sale face additional compliance complications.

1. Get a pre-sale tax estimate. A Japanese tax accountant (zeirishi) can calculate your approximate tax liability before you commit to a sale price, helping you negotiate accordingly.

1. Consider the timing of moving abroad. If you are planning to leave Japan and sell your home, the order of operations matters. Selling while still a resident may allow you to use the ¥30M deduction; selling as a non-resident triggers withholding but eliminates resident tax (5%).

For a full picture of the selling process beyond tax considerations, read our complete guide to selling property in Japan as a foreigner.

Capital Gains Tax vs Other Property-Related Taxes

It is worth distinguishing capital gains tax from other taxes you will encounter when selling Japanese property:

For an in-depth look at annual property ownership taxes, see our guide on property taxes and annual costs in Japan.

Further Resources

For more detailed guidance on Japan tax matters for expatriates and foreigners:

• Living in Nihon's tax and financial guides for residents in Japan cover a range of personal finance topics relevant to foreign residents
• For Work in Japan's financial basics guide provides context on tax obligations for foreign workers and residents
• E-Housing's 2025 Complete Guide to Selling Property in Japan includes detailed commission rates and timelines
• Plaza Homes' capital gains tax guide provides useful worked examples
• Leo Wealth's guide to Japanese CGT for foreigners covers residency-status implications in detail

Conclusion

Capital gains tax on Japan property sales is manageable — but only if you understand the rules in advance. The difference between a short-term and long-term sale can cost or save you nearly 20 percentage points of your gain. The ¥30 million primary residence deduction can eliminate your entire tax bill on a mid-range home. Non-resident withholding is a cash-flow consideration that catches many sellers off guard if they have not planned for it.

The best strategy: consult a Japanese tax accountant with experience in international transactions before you list your property. The cost of professional advice is almost always a fraction of the tax savings they can identify.

For more on the financial and legal aspects of property ownership in Japan, explore our Japan real estate investment guide for foreigners and our article on inheritance and estate planning for property in Japan.