Koteishisanzei: The Annual Property Tax in Japan, Explained

TL;DR: Every owner of land or a building in Japan pays an annual koteishisanzei (fixed-asset tax), and inside city zones an extra toshi keikaku zei (city-planning tax). The bill is based on a government hyouka gaku (assessed value) that is usually well below market price, not on what you paid. Standard rates are 1.4% for fixed-asset tax and up to 0.3% for city-planning tax (directional, as of writing), and a strong reduction applies to small residential land. In the year you buy, the seller is the legal taxpayer, but buyer and seller almost always split the bill by date at closing.

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What koteishisanzei Actually Is

I work in the Tokyo market, and this is the tax foreign buyers most often forget to budget for. Koteishisanzei is a municipal tax charged once a year to whoever owns the property on January 1. It applies to both the land and the building, assessed separately. There is no escape based on residency or nationality: if you own real estate here, you owe it, whether you live in Tokyo, Singapore, or London.

Alongside it, most urban property also carries toshi keikaku zei (city-planning tax). This funds roads, parks, and sewers in designated city-planning zones. Almost every apartment and house inside Tokyo’s 23 wards sits in such a zone, so in practice Tokyo buyers should assume both taxes apply. I tell clients to think of them as one combined annual bill, because the city sends them together.

The standard fixed-asset tax rate is 1.4% of assessed value, and city-planning tax is capped at 0.3% (both directional, as of writing). Municipalities can set their own rate within limits, so confirm the exact figure for the specific ward or city with a licensed tax professional or the local tax office before you rely on it.

Assessed Value Is Not Market Price

This is the single biggest source of confusion I see. The tax is not calculated on your purchase price. It is calculated on the hyouka gaku (assessed value), a figure the municipality sets and reviews on a three-year cycle.

For land, the assessed value typically runs noticeably below actual market value — often in the rough range of 60-70% of an official reference price (directional, as of writing), and even further below what a hot Tokyo location might fetch on the open market. For buildings, the assessed value is based on a reconstruction-cost method that depreciates over time, so an older building is assessed lower than a new one of the same size. A brand-new tower unit therefore carries a higher building assessment than a 30-year-old unit nearby.

The practical takeaway: do not estimate your tax by multiplying your purchase price by 1.7%. That will overstate the bill, sometimes badly. To get a real number, you want the kotei shisan zei kazei meisaisho (the tax assessment statement) for that specific property. As a buyer’s agent I pull the current year’s figure before you sign, so there are no surprises. You can also sketch a rough range yourself with our tools, but treat any self-estimate as a ballpark only.

The Small-Residential-Land Reduction

Japan deliberately makes it cheaper to own a home you live in, and this matters even for investors who rent to residential tenants. The jutaku yochi tokurei (residential-land special reduction) sharply cuts the taxable base on land used for housing.

The mechanism, in plain terms: for the portion of residential land up to 200 square meters per dwelling unit — the shou kibo jutaku yochi (small-scale residential land) — the fixed-asset tax base is reduced to one-sixth, and the city-planning tax base to one-third (these are fixed statutory fractions). Land above that threshold, up to the building’s floor area, gets a one-third reduction for fixed-asset tax. For a typical Tokyo apartment, the land share attributed to your unit is small, so most of it falls inside the favorable bracket.

Two things foreign owners miss here. First, the reduction attaches to residential use, not to who lives there — a unit you rent out as a home generally still qualifies, but confirm your situation with a licensed professional. Second, if a property is vacant and falls under certain neglected-vacant-house rules, the reduction can be lost and the bill can jump several-fold. If you are buying an old house to sit on, factor that in.

A Directional Example, and the New-Build Break

Let me put rough numbers on it so the scale is clear. Imagine a Tokyo apartment where the land attributed to your unit is assessed at, say, 8,000,000 yen and the building at 12,000,000 yen (illustrative, not a quote).

The land, sitting under the small-scale reduction, has its fixed-asset base cut to one-sixth — so roughly 1,333,000 yen — and at 1.4% that is about 19,000 yen. The building at 12,000,000 yen times 1.4% is about 168,000 yen. Add city-planning tax at up to 0.3% on the (differently reduced) bases and you land in the low-to-mid 200,000s yen for the year (all directional, as of writing, and entirely dependent on the real assessed values). Numbers scale with the property; a high-end central unit runs materially higher.

New-build residences often get a temporary building-tax halving for the first few years after construction (directional, as of writing, and time-limited by statute), which is why a new unit’s first bills can look deceptively low before stepping up. Always ask whether a low quoted figure reflects a reduction that is about to expire.

When the Bill Arrives and Who Pays in the Purchase Year

The municipality assesses ownership as of January 1 and mails the nouzei tsuuchisho (tax payment notice) in spring — generally around April to June (directional, as of writing). You can pay in four installments across the year or in a lump sum. For overseas owners, this is a real logistics issue: if you have no Japanese address, you typically need a nouzei kanrinin (a tax agent in Japan) to receive the notice and pay on your behalf. Set this up at purchase, not after the first missed deadline.

Now the part that surprises buyers most. Because the legal taxpayer is whoever owned the property on January 1, the seller is technically liable for the entire year’s tax even if they sell in February. So by long-standing market custom — not by law — buyer and seller prorate the annual amount by date at closing. The buyer reimburses the seller for the days from the handover through year-end. This koteishisanzei seisan (the property-tax settlement) appears as a line item in your closing statement. It is not a tax you pay to the government; it is a private adjustment between the two parties, and there is no statutory formula, so check exactly how your contract defines the start date and the day count.

What This Means For Your Next Move

Budget for koteishisanzei plus toshi keikaku zei as a recurring annual holding cost from day one, get the property’s real assessed value before you commit, and line up a tax agent if you live abroad. The headline rates are standard, but the actual bill swings on assessed value, the residential-land reduction, and whether any new-build break is about to roll off — so the only number that matters is the one for your specific unit.

If you want that real figure pulled and explained before you sign, Talk to us. You can rough out a holding-cost estimate first with our tools, and if you are still choosing a location, compare wards to see how assessed land values and total carrying costs differ across Tokyo. None of the above is personalized tax advice — confirm your own position with a licensed tax professional.

Sources: Tokyo Metropolitan Tax Bureau, Ministry of Internal Affairs and Communications — local tax, National Tax Agency, Japan External Trade Organization (JETRO) investing guide