Buyer's Guide

Buying a Tokyo Second Home

A quick guide to ownership structure, taxes and rental options for an overseas resident buying property in Tokyo.

1. Which ownership structure?

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Individual

Best suited to one second home, mainly for personal use, with possible monthly rental while overseas.
15.315%
Capital gain if held more than 5 years
30.63% if held 5 years or less
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Foreign Company

More relevant where the property forms part of an existing overseas company's investment portfolio.
Varies
Japanese tax still applies
Cross-border accounting and tax treatment must also be considered.
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Japanese Company – GK/KK

More relevant where several Japanese rental properties are owned and rental income becomes substantial.
22–34%
Broad corporate tax guide
Can become more attractive where profits are retained and reinvested into further properties.

2. Estimated costs on a ¥250m Tokyo house

Acquisition Tax
¥1.5–3.0m
Registration Tax
¥1.5–2.5m
Stamp Duty
¥60,000
Annual Property Taxes
¥0.3–0.7m
Brokerage + Legal / Admin
¥9–10m
Consumption Tax
Land: None
Estimated total purchase taxes & closing costs Excluding loan-related costs
¥12–16m

3. Individual vs Japanese Company for Rental Income

For a non-resident individual, personal ownership is generally more tax-efficient at lower levels of taxable rental profit. As profit rises, the progressive individual tax rate increases, while corporate tax remains within a narrower range.

¥10m Taxable Profit

Individual: ~18%
Approx. ¥1.8m Japanese income tax
Japanese GK: ~25%
Approx. ¥2.5m corporate tax

¥30m Taxable Profit

Both: ~31%
Approximate crossover point
Individual: ~¥9.4m
Japanese income tax
Japanese GK: ~¥9.4m
Corporate tax

¥50m Taxable Profit

Individual: ~36%
Approx. ¥18.1m Japanese income tax
Japanese GK: ~33%
Approx. ¥16.3m corporate tax
Rough crossover: around ¥30 million annual taxable profit
Below this level, individual ownership can be more tax-efficient. Above this level, a Japanese company can begin to have a lower effective tax rate, particularly where profits are retained and reinvested.
Illustrative comparison only. This compares Japanese tax at the individual/company level and does not include tax that may arise if company profits are later distributed to shareholders.

4. Key points for a non-resident owner

Rental withholding
20.42%
May apply to rent paid to a non-resident owner. Residential tenant exceptions can apply.
Sale withholding
10.21%
Generally withheld from the sale price when a non-resident sells Japanese real estate. This is an advance withholding, not necessarily the final tax liability.

5. Monthly rental or Airbnb?

Monthly Residential Rental

Normal or fixed-term residential lease.

IREA can assist

Airbnb / Short-term rental

Generally limited to 180 days per year, with additional restrictions possible depending on the Tokyo ward.

IREA does not manage short-term rentals
Tax treatment depends on the purchaser's circumstances and country of tax residence. Final ownership structure should be confirmed with a Japanese tax accountant.