The month of which the property changed ownership:
*For example, if the property changed ownership in September enter “9” above.

Building Cost

62 million yen

Land Cost

10 million yen

Annual Revenue

9 million yen

Expense

5 million yen

Year 1 (Based on 8%)
Proportion0.3
Initial C-tax Rebate¥4,960,000
C-tax on Sales (Payable)¥180,000
C-tax on Purchases (Credit)¥100,000
Total¥4,880,000
Year 2 (Based on 10%)
C-tax Rebate¥0
C-tax on Sales (Payable)¥900,000
C-tax on Purchases (Credit)¥500,000
Total¥400,000
Year 3 (Based on 10%)
C-tax Rebate¥0
C-tax on Sales (Payable)¥900,000
C-tax on Purchases (Credit)¥500,000
Total¥400,000
Total over 3 years¥4,080,000
Additional Accounting Fees for Japanese Consumption Tax filing.
Year 1¥100,000
Year 2¥80,000
Year 3¥80,000
Various Forms – Submission¥16,500
Total¥276,500
Net Benefit to the Property Owner¥3,803,500

Consumption Tax Explained

As a general rule, Japan Property Consumption Tax (shouhizei) is payable on the sale of a building only and does not apply to the sale of land. In Japan, ownership of a building and the ownership of the land where the building is located are classified as separate legal entities.

In short, this means that when land and buildings are wrapped up in a sale to another counter party, consumption tax is payable on the purchase price of the building/s only.

IMPORTANT NOTE: The seller is legally responsible for paying Japan consumption tax to the national tax authorities (currently 10%), although usually in practice the buyer agrees to pay the consumption tax amount to the seller along with the purchase price.

Residency for calculation.

Sellers of Japanese real estate are liable for consumption tax in Japan, regardless of whether the seller actually resides in Japan, and regardless of whether the seller is deemed to have a ‘permanent establishment’ in Japan under Japanese income tax rules.

However, foreign and/or Japanese sellers not qualifying as a ‘taxable enterprise’ for Japanese consumption tax purposes [generally any person or entity with more than 10 million JPY qualifying revenue in the fiscal year two years prior to the date of transfer] are exempted from having to pay consumption tax.

The above calculators are for informational purposes only. Any advice in this communication is not intended or written by us to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed by any governmental taxing authority or agency, or (ii) promoting, marketing or recommending to another party any matters addressed herein.The opinions and analyses expressed herein are subject to change at any time and are based on current market conditions. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change.

No warranty or representation, express or implied, is made by SMEJapan, nor does SMEJapan accept any liability with respect to the information and data set forth herein.