Japan’s Ministry of Internal Affairs and Communications (総務省) is considering extending the prefectural individual business tax (個人事業税) to people who live outside Japan but run a rental-property or parking-lot business inside the country, Nikkei (日本経済新聞) reported on October 31. The move is still at the “under consideration” stage: the ministry is aiming to include it in the ruling coalition’s fiscal 2027 tax reform outline, which is normally finalized in December — if it doesn’t make that document, the proposal stops there for now.
The mechanics. Individual business tax is calculated as (real-estate income minus a ¥2.9 million business-owner deduction) × 5%, and it only applies above a scale threshold that varies by prefecture — in Tokyo, for example, 10 or more apartment units, 10 or more detached rental houses, or 10 or more open-air parking spaces. National income tax already applies to Japan-sourced rental income regardless of where the owner lives, but the prefectural business tax is levied based on where a business has an office — and an owner with no office or address in Japan currently has no basis for prefectural taxation. That gap is what the proposal targets: two landlords with an identical rental property, one living in Japan and one abroad, currently pay different local tax.
Who it would actually reach. The tax only applies to property held in an individual’s own name — not property held through a Japanese company. According to Urataken Real Estate (ウラケン不動産), a Malaysia-based Japanese real estate investor and commentator who has written extensively on cross-border ownership structures, most non-resident owners who are flagged in the public debate over foreign money pushing up Tokyo condominium prices typically hold that property through a Japanese corporation rather than in their own name — a structure that, under current rules, falls outside individual business tax entirely (companies pay a separate corporate business tax instead). If accurate, a tax change framed around “fairness” between resident and non-resident individual landlords would leave most of the foreign-held corporate property pricing debate untouched.
What it would cost, if adopted. Using the formula above, an individual landlord with ¥5 million in annual rental income (after the ¥2.9 million deduction) would owe roughly ¥105,000 a year; at ¥10 million income, about ¥355,000. Administrative details — including how non-resident owners would file and pay, and whether a Japan-based tax agent would handle it — are not yet settled. Based on the reported timeline, if the change takes effect from 2027 income, the first payment would fall around August 2028.
Zagdim’s View — If you’re a non-resident individual holding 10 or more rental units or parking spaces in Japan in your own name, this would add a new, modest annual cost once (and if) it clears the December tax-reform outline — not a reason to restructure ownership on its own, since switching to a corporate structure carries its own tax and compliance costs. If you hold Japanese property through a company, as most larger non-resident investors already do, this specific proposal does not currently reach you; any further tightening aimed at foreign-held corporate property is more likely to come through the separate discussion Japan is having about taxing quick resale, which is a distinct proposal still being debated in parallel.
References
Nikkei (日本経済新聞) – 海外居住者の国内不動産、賃貸事業に課税 公平性確保へ / Urataken Real Estate (ウラケン不動産) via note.com – 海外在住の大家にも「個人事業税」？対象になる大家・ならない大家の分かれ目
