If you sell a property you own in Japan to a Japanese real estate company, a portion of the sale proceeds may be withheld for income tax. In this case, do you need to file a tax return? This article explains the tax treatment when a foreigner sells real estate in Japan, when income tax is withheld, whether tax filing is required, and whether special deductions apply when selling a residential property.
1. Is the Sale of Real Estate Taxable?
Whether the sale of real estate is taxable depends on the taxpayer’s residency status and the location of the property.
For details on residency status, please refer to this article.
| Property Location | Residency Status | Taxable? |
| Real Estate in Japan | Permanent Resident | Taxable |
| Non-Permanent Resident | Taxable | |
| Non-Resident | Taxable
(10.21% Withholding tax) |
|
| Overseas Real Estate | Permanent Resident | Taxable◎ |
| Non-Permanent Resident | Partially Taxable*◎ | |
| Non-Resident | Not Taxable |
*Income paid in Japan or remitted from abroad is taxable.
◎ If you file a tax return in Japan, you may be eligible for a foreign tax credit.
2. When Is Withholding Tax Applied?
If a non-resident sells property located in Japan for 100 million yen or less and the buyer is an individual purchasing it for their own or a family member’s residence, withholding tax does not apply.
3. Is Tax Filing Required?
A transaction listed as ‘Taxable (10.21% withholding tax)’ in the table above requires a tax return. Even if tax has been withheld, you still need to file a tax return to reconcile the final tax amount.
4. Special Deduction of 30 Million Yen for Residential Property Sales
Even if you are a non-resident, you may qualify for the special 30-million-yen deduction if you sell a house you personally lived in and meet certain conditions. However, this deduction does not apply to vacation homes or properties primarily used for hobbies, recreation, or leisure purposes. For example, if a resident returning from the United Kingdom sells a property that was used as their residence in the UK, this special deduction may apply as long as the applicable conditions are met.
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