Buying property in Japan currently means paying consumption tax at 10%. That sounds like a lot added on top of the price, but in practice it applies less broadly than many buyers assume. Since 2019, Japan’s consumption tax rate rose from 8% to 10%, which also increased the cost of buying property. Beyond the property itself, many of the surrounding services in a purchase — agent fees, renovation costs, furniture purchases and more — can also attract consumption tax.
Consumption Tax on New Properties
Japan’s consumption tax applies a uniform 10% rate to almost all goods, with land sales as the main exception. When a buyer purchases a new property from a developer, consumption tax is charged only on the “building” portion of the price.
Property in Japan is divided into “land” and “building” components. Land is treated as a natural resource rather than goods, so it is not subject to consumption tax. The building is the developer’s product, so consumption tax applies to the building portion only.
For example, take a new unit priced at JPY 60 million, where the fixed-asset tax valuation attributes JPY 30 million to the land and JPY 30 million to the building. The buyer pays consumption tax only on the JPY 30 million building portion:
- Land JPY 30 million + Building JPY 30 million × 1.1 = JPY 63 million
Consumption Tax on Resale (Secondhand) Properties
Buying a secondhand property in Japan can involve more consumption tax touchpoints than buying new.
Consumption Tax on the Building Portion
If the property being purchased is not a new unit but a secondhand one, and the seller is an individual (a natural person), then even the building portion is exempt from consumption tax. Using the same JPY 60 million example, the buyer pays only the JPY 60 million price, with no consumption tax at all. Conversely, if the seller is a corporate entity, the building portion is taxed the same way as for a new property, with the calculation unchanged from the new-property example above.
Consumption Tax on Agent Fees
Properties priced at JPY 4 million or above typically carry an agent (brokerage) fee of 3% of the price plus JPY 60,000, and this fee itself is subject to consumption tax. Using the same JPY 60 million property as an example, the agent fee works out as:
- (JPY 60,000,000 × 3% + JPY 60,000) × 1.1 (consumption tax) = JPY 2,046,000, of which JPY 1.86 million is the agent fee itself and JPY 186,000 is the consumption tax on that fee.
Separately, since July 1, 2024, properties priced at JPY 8 million or below (not limited to vacant homes) qualify for a special agent-fee cap of up to JPY 300,000 plus tax (JPY 330,000) from each side, if agreed in advance in the brokerage agreement.
Consumption Tax on Judicial Scrivener Fees
Property transactions in Japan generally involve engaging a professional judicial scrivener (shiho-shoshi) to handle real estate registration. Judicial scrivener fees vary by individual, but because this is a professional service, the full fee — whatever the amount — is subject to the 10% consumption tax.
Fire and Earthquake Insurance
Japan’s property market offers fire and earthquake insurance for owners to purchase, typically in five-year terms. Premium amounts vary depending on the building’s age, size, construction materials and other factors. Because this is an insurance company service, it is also subject to consumption tax.
Rental Management Fees
Because Japan is geographically large, owners are often based in a different city from the unit they rent out, which is why rental management companies exist. Whether the owner is based overseas or living in Japan, a Japanese rental management company can be engaged to handle day-to-day tenant matters, typically for a fee of around 5%–7% of monthly rent. This management service fee is also subject to consumption tax.
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