Income tax on capital gain on real estate transaction in Japan

When non resident ( hereinafter called Nancy ) sells real estate in Japan, she has to submit tax filing ( Kakutei Shinkoku = 確定申告 ).

When Nancy files tax return, she can apply basic exemption. ( Kiso Kojo = 基礎控除 ).

When Nancy ( Non resident of Japan ) sells her real estate in Japan, she has to calculate income tax (Shotoku zei = 所得税 ) separate from other income like employment income, business income. ( separate taxation = Shinkoku bunri kazei = 申告分離課税 )

In Japan, rate of income tax is different from the amount of salary.
For example, when Nancy’s taxable income is 10 million yen, rate of income tax ( Shotoku zei ) is 33%.
For example, when Nancy’s taxable income is 3 million yen, rate of income tax ( Shotoku zei ) is 10%.

But in the case that Nancy sells her property and gets profit, rate of tax is as below.

Long-term capital gains ( When Nancy has owned this property for more than 5 year as of January 1st in selling year. ) : 15% ( as for Income tax )
Short-term capital gains : 30% ( as for Income tax )

Japanese tax agency confimrs if Nancy has owned her real estate for long term or short term by as of January 1st.
Let’s say Nancy bought her property at November 11th, 2011 and sells it at January 2nd 2017.
Nancy was not owner as of January 1st 2011.
Nancy was owner as of January 1st of 2012, 2013, 2014, 2015, 2016, 2017.
So, she has owned the property more than 5 years.
So, when she sells her property and gets profit, income tax rate is 15%.

Let’s say Nancy sells her property at December 31st 2016.
Nancy was owner as of January 1st of 2012, 2013, 2014, 2015, 2016.
So, she has NOT owned the property more than 5 years.
She has owned the property for 5 years.
So, when she sells her property and gets profit, income tax rate is 30%.

And if she is resident ( Kyoju sha = 居住者 ) in Japan, she has to pay resident tax ( Juminzei ), too.

Long-term capital gains  ( When Nancy has owned this property for more than 5 year as of January 1st in selling year. ) : 5%
Short-term capital gains : 9%

And when Nancy sells her real estate and it is her residence, she can apply deduction.
The amount is 30 million yen.
Even  if she gets profit of 20 million yen, she does not need to pay income tax.
( She has to file tax return to use this deduction. )
Even if she has lived there only 1 year, she can apply this deduction.

😯  Above all, I have explained about tax on capital gains.
But, in the case of corporate, this 15% or 30% is not applied.

Assumed a company purchased a real property at 10 yen and sold it at 20 yen and if this company got capital gain from transferring of property.
Profit from this transaction is consolidated with other profit  corporate tax ( Hojin zei= 法人税 ) is levied.
When the total amount of profit of the company is below 8 million yen per a business year, tax rate is 15%. And as for part of over 8 million yen, tax rate is 23.9 % .

As for corporate tax in Japan.
Assumed annual taxable income of a company  is 10,000,000 yen.
8 million yen × 15% = 1,200,000 yen.
( 10,000,000 yen – 8 million yen ) × 23.9 % = 478,000 yen. Total : 1,200,000 yen +478,000 yen = 1,678,000 yen.
So, roughly speaking, the amount of corporate tax is 1,678,000 yen.

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