Ushijima & Partners, Attorneys-at-Law
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
In principle, there are no special restrictions on foreigners or foreign companies owning or occupying real estate, and they may own or occupy real estate under the same regulations as those applicable to Japanese nationals.
On the other hand, when a non-resident (an individual who does not have a domicile or residence in Japan or a corporation or entity that does not have its principal office in Japan) acquires domestic real estate or rights (leasehold, etc.) related thereto, they must report to the Minister of Finance (via the Bank of Japan) within 20 days under the Foreign Exchange and Foreign Trade Law.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
There are no special restrictions on foreign companies from lending for the purchase of real estate.
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
1. Real Estate Acquisition Tax (Fudosansyutoku-zei)
Real estate acquisition tax is a tax imposed on the purchaser of real estate. In principle, the tax rate is 4% of the Fixed Property Assessment Value (Koteishisan-zei Hyoukagaku; the “FPAV”) of the real estate (*1).
2. Consumption tax (Shohi-zei)
Consumption tax is imposed on the transfer of buildings for consideration effectuated in Japan by a taxable business operator for its business purposes, and it is added to the sales price and thereby is borne by the purchaser. The tax rate is 10% of the building's sales price (including both the national and local consumption tax rates).
3. Withholding Tax (Gensenshotoku-zei)
In principle, a person who purchases real estate from a non-resident or a foreign corporation and makes payment of the sale price in Japan (*2) is required to withhold income tax and special income tax for reconstruction at the rate of 10.21% from the sales price at the time of payment.
4. Stamp tax (Inshi-zei)
Stamp tax is imposed when a contract for the purchase and sale of real estate is executed. The tax rate is determined based on the contract amount.
5. Registration and License Tax (Tourokumenkyo-zei)
Registration and license tax is imposed when registering a buyer’s title to real estate. The tax rate is, in principle, 2% of the FPAV of the real estate in the case of registration of transfer of ownership of the real estate, and 0.4% of the FPAV of the real estate in the case of initial registration of ownership of a building.
6. Other Costs
There are various other costs related to buying real estate in Japan, e.g., (i) a brokerage fee (the legal maximum amount is approximately 3.3% of the sales price) when a real estate transaction is brokered by a licensed real estate broker and (ii) a fee for a judicial scrivener (Shihousyoshi) for registration of a buyer’s title.
*1: The FPAV refers to the amount registered on the Fixed Property Tax Roll (Kotei Shisan Kazei Daicho) of the municipality in which the property is located and not the purchased value or the cost of construction.
*2: Even if the payment of the sales price is made outside Japan, there are cases where tax withholding is required.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner
1. Fixed Property Tax (Koteishisan-zei)
Fixed property tax is imposed annually on land, etc., in Japan held by an individual or a corporation as of January 1. In principle, the tax rate is 1.4% of the FPAV of the real estate.
2. City Planning Tax (Toshikeikaku-zei)
City planning tax is an annual tax imposed on the land, etc., in Japan that is owned by an individual or a corporation as of January 1 and is located within a city planning area. In principle, the tax rate is 0.3% of the FPAV of the real estate.
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so, what are they?
There is no special tax break or other incentive applicable to the purchase of real estate by a foreigner or foreign corporation.
How is the ownership of Real Estate evidenced in your jurisdiction?
Practically, ownership of real estate is evidenced by real estate registration (registry).
The registry records, among other information, the location and parcel area of land and buildings, as well as the name and address of the owner. When real estate is sold/purchased, the transfer of ownership is usually registered (a record that the owner has changed) through a joint application by a person entitled to register (the buyer) and a person obliged to register (the seller).
Anyone can obtain a certificate of registered matters (a document certifying the matters recorded in the registration record) at the registry office.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
It is not possible. The Real Estate Registration Law requires the name and address of the real estate owner to be recorded in the real estate registration.