Selling Property in Japan as a Foreigner: Capital Gains Tax

TL;DR: When you sell Japanese property, the tax that matters most is joto shotokuzei (capital gains tax), and it splits hard at the five-year mark: roughly 39% if you held five years or less, roughly 20% if you held longer (both directional, as of writing). If you are a non-resident seller, the buyer is legally required to withhold 10.21% of the gross price and remit it to the tax office, then you reconcile (and usually reclaim part of it) by filing. None of this is personalized advice, so confirm the numbers with a licensed tax accountant before you sign anything.

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The Five-Year Rule Decides Almost Everything

The single biggest lever on your tax bill is how long you owned the place. Japan splits capital gains on real estate into two buckets, and the gap between them is brutal.

Short-term (tanki joto) applies when you held the property five years or less. The combined national-plus-local rate lands around 39% of the taxable gain (directional, as of writing). Long-term (choki joto) applies when you held longer than five years, and the rate drops to roughly 20% (directional, as of writing). Same property, same gain, double the tax if you sell too early.

Here is the trap that catches almost every foreign seller: the five years is not measured from your purchase date to your sale date. It is measured to January 1 of the year you sell. So if you bought in March 2020 and sell in summer 2025, you might feel like you owned it more than five years, but the clock stops at January 1, 2025 — which is under five full years from a 2020 purchase counted this way. People lose serious money by selling a few months before the threshold flips. If you are anywhere near the line, work out the exact date with a tax pro before you list. Sometimes waiting one extra new-year quietly halves your tax.

The taxable gain itself is, simplified: sale price minus your acquisition cost minus selling expenses. Acquisition cost includes what you paid plus purchase-side costs, but the building portion is reduced for depreciation (genka shokyaku) over the years you owned it — so your “cost” for tax is often lower than what you actually paid, which inflates the gain. Keep every receipt from the original purchase. If you cannot prove acquisition cost, the tax office can default it to a small percentage of the sale price, and that is a disaster for your bill.

The 10.21% Non-Resident Withholding, Explained Plainly

If you live outside Japan at the time of sale — meaning you are a non-resident (hikyojusha) for tax purposes — there is a mechanism that surprises a lot of sellers. The buyer is legally obligated to withhold 10.21% of the gross sale price and pay it directly to the tax office on your behalf. This is a fixed legal standard, not a directional figure.

Read that carefully: it is 10.21% of the gross price, not of your gain. So on a sale where you barely made a profit — or even lost money — the buyer still parks 10.21% of the whole price with the tax authority. It is a collection device, not your final tax.

There is a common exemption worth knowing: the withholding generally does not apply when the buyer (or a close relative of the buyer) is an individual purchasing the property to live in it themselves, and the price is at or below a set threshold (commonly cited around 100 million yen — directional, as of writing). Above that, or when the buyer is a company or an investor, expect the 10.21% to be taken. Because your buyer’s situation changes whether this happens at all, do not assume — ask your agent to confirm the buyer profile during negotiations.

How You Actually Get That Money Back

The 10.21% is an advance, not a penalty. You reconcile it by filing a Japanese tax return (kakutei shinkoku) in the year after the sale, typically in the February-to-March window (directional, as of writing).

The return computes your real tax — gain times the short- or long-term rate — and credits the 10.21% already withheld against it. In most ordinary sales, the withheld amount exceeds the actual tax due, so you receive a refund of the difference. If your gain was large and short-term, the withholding might not cover the full bill and you top it up instead.

The catch for someone living abroad: a non-resident generally must appoint a tax representative (nozei kanrinin) in Japan — a person or firm who receives notices and handles the filing on your behalf. Set this up before completion, not after. I have watched sellers leave the country, forget the filing, and effectively gift the tax office 10.21% of their sale price because they never reclaimed it. The money is yours; you just have to file to get it.

There is also separate machinery if Japan and your home country have a tax treaty, since you may owe (or get credited) tax back home too. Cross-border tax is genuinely where amateurs get hurt — this is the part where I will plainly tell you to hire a licensed tax accountant (zeirishi) who handles non-residents, and ideally one who can talk to your accountant at home.

The Selling Process and Timeline, Start to Finish

The mechanics of selling property in Japan as a foreigner are not mysterious, but the timeline is longer than most expect — figure a few months from listing to cash in hand for a normal Tokyo apartment (directional, as of writing).

The rough sequence:

1. Valuation and listing. You sign a brokerage agreement with an agent, agree a price, and the property goes to market (often via the industry listing network).
2. Offer and negotiation. A buyer submits an offer; you negotiate price and conditions.
3. Contract (baibai keiyaku). Signing, with the buyer typically paying a deposit (tetsuke) of around 10% (directional, as of writing).
4. Settlement and handover (kessai / hikiwatashi). Balance paid, title transferred at the legal scrivener’s (shiho shoshi) desk, keys handed over.

On cost: the agent’s brokerage commission is capped by law at 3% of the price plus 60,000 yen (plus consumption tax) for the typical transaction band — that ceiling is a fixed legal standard, the same cap you paid when buying. You also pay the shiho shoshi for any title work on your side, plus stamp duty on the contract. Budget for these so the net figure in your head is honest.

Selling Remotely Without Flying to Tokyo

You do not need to be physically in Japan to sell. I close sales for owners living in Sydney, Singapore, and California regularly. The tools that make it work:

• A power of attorney (ininjo) authorizing a trusted representative or the shiho shoshi to act at settlement.
• For non-residents who no longer hold a Japanese address, a signature affidavit (sain shomeisho) from your local notary or your country’s Japanese consulate, which substitutes for the registered seal (jitsuin) and residence certificate that resident sellers use.
• Remote document courier and bank arrangements for receiving the proceeds.

The affidavit step is the one that quietly adds weeks, because notarization and consular processing run on their own clock. Start it the moment you decide to sell. If you want to sanity-check what your specific apartment might fetch and what the net-of-tax number looks like before committing, our tools are a reasonable starting point, and you can compare wards if you also hold other units and are deciding which to exit first.

What This Means For Your Next Move

The honest summary: time your sale around the five-year line, keep your original purchase paperwork so your gain is not overstated, and if you are a non-resident, set up a tax representative and budget for the 10.21% withholding as a temporary cash hit you will mostly reclaim by filing. The difference between doing this well and doing it carelessly is frequently a meaningful chunk of your sale price.

This article is general information, not tax, legal, or investment advice — your residency status, treaty position, and depreciation history all change the math, so confirm with a licensed zeirishi before you act.

If you want a straight read on timing, the likely net proceeds, and how to run a remote sale cleanly, Talk to us — a real person who knows this market will look at your specific situation. Run rough numbers first with our tools, and if you hold more than one property, compare wards to decide what to sell and what to hold.

Sources: National Tax Agency of Japan (NTA) — English, Japan External Trade Organization (JETRO) — Investing in Japan, Ministry of Land, Infrastructure, Transport and Tourism (MLIT)