Many countries levy an annual property tax on homeowners to fund local government. Japan has a similar arrangement: property owners pay tax to the local government to support ongoing development, made up of “fixed asset tax” and “city planning tax.” Because these two taxes are paid using the same form, they are commonly referred to together as “kotoi-zei.” Owners generally receive a tax notice from the tax office around April each year.
How Fixed Asset Tax Is Calculated
Fixed asset tax can be split into “land” and “building” components; both use the same formula — 1.4% of the fixed asset tax assessed value — and adding the two together gives the property unit’s fixed asset tax for that year. If the “land” is residential land under 200m² in area, it qualifies for a reduction, calculated at 1/6 of the fixed asset tax assessed value.
Fixed asset tax = fixed asset tax assessed value × 1.4%
| Item | Formula |
|---|---|
| Land fixed asset tax | Fixed asset tax assessed value × 1.4% |
| Land fixed asset tax (under 200m²) | Fixed asset tax assessed value × 1/6 × 1.4% |
| Building fixed asset tax | Fixed asset tax assessed value × 1.4% |
How City Planning Tax Is Calculated
City planning tax is levied to fund the cost of carrying out city planning projects or land readjustment projects. It is also split into “land” and “building” components, using the formula of 0.3% of the fixed asset tax assessed value; adding the “land” and “building” amounts together gives the property unit’s city planning tax for that year. If the “land” is residential land under 200m² in area, it likewise qualifies for a reduction, calculated at 1/3 of the fixed asset tax assessed value.
City planning tax = fixed asset tax assessed value × 0.3% (the statutory ceiling under Local Tax Act Article 702-4 — municipalities cannot set a higher rate)
| Item | Formula |
|---|---|
| Land city planning tax | Fixed asset tax assessed value × 0.3% |
| Land city planning tax (under 200m²) | Fixed asset tax assessed value × 1/3 × 0.3% |
| Building city planning tax | Fixed asset tax assessed value × 0.3% |
Fixed Asset Tax Assessed Value
The fixed asset tax assessed value is determined independently by each municipal government in Japan, calculated by formula under the “Fixed Asset Valuation Standards.” Each property unit’s registered assessed value can be found on its “Property Tax Statement” (kaoku kouka shoumeisho), and this is the figure used to calculate the kotoi-zei owed.
Below are two worked examples of the kotoi-zei calculation, with all figures in Japanese yen.
(1) An 80㎡ Secondhand Home, 5 Years Old
| Item | Calculation | Amount |
|---|---|---|
| Land fixed asset tax | Tax base (fixed asset tax roll value × 1/6) × 1.4% rate | 11,282,000 ÷ 6 × 1.4% = 26,324 |
| Land city planning tax | Tax base (fixed asset tax roll value × 1/3) × 0.3% rate | 11,282,000 ÷ 3 × 0.3% = 11,282 |
| Building fixed asset tax | Tax base × 1.4% rate | 12,450,000 × 1.4% = 174,300 |
| Building city planning tax | Tax base × 0.3% rate | 12,450,000 × 0.3% = 37,350 |
| **Total** | **249,256** |
(2) A Brand-New 25㎡ 1K Studio
| Item | Calculation | Amount |
|---|---|---|
| Land fixed asset tax | Tax base (fixed asset tax roll value × 1/6) × 1.4% rate | 4,568,000 ÷ 6 × 1.4% = 10,658 |
| Land city planning tax | Tax base (fixed asset tax roll value × 1/3) × 0.3% rate | 4,568,000 ÷ 3 × 0.3% = 4,568 |
| Building fixed asset tax | Tax base × 1.4% rate | 4,907,000 × 1.4% = 68,698 |
| Building city planning tax | Tax base × 0.3% rate | 4,907,000 × 0.3% = 14,721 |
| **Total** | **98,645** |
Summary
Different regions, and different types of buildings, may also have their own additional tax relief measures, so the figures above reflect a general-case calculation. The actual amount owed should be based on the figure stated on the “Fixed Asset Valuation Certificate” (kotei shisan hyoukagaku shoumeisho).
Have a question about this guide? Leave a comment below, or ask Zagdim directly.
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