Fixed Asset Tax in Japan: A Complete Guide

What it is

The acquisition tax hits you once. This one comes back every single year for as long as you own the property.

- An annual municipal tax charged on land, buildings, and business-use depreciable assets located in Japan.

- Liability falls on whoever is recorded as the owner on the tax ledger as of 1 January each year. The municipality calculates the amount, issues a notice, and the owner pays on that basis.

- Owner nationality and residence are irrelevant. A foreign individual or company owning Japanese property is taxed on exactly the same terms as a Japanese owner.

- The standard rate is 1.4%. It is not uniform nationwide — municipalities can set their own rate — but almost all of them use 1.4%.

- A second tax, city planning tax, is charged alongside it on property inside designated urban planning zones, at up to 0.3%.

- One point that trips up buyers: the 1 January owner is liable for the entire year. When a property changes hands mid-year, the parties normally split the cost by day in the sale contract, but that is a private arrangement between them. The municipality still bills the person who owned it on 1 January.

How it is calculated

The headline rate tells you very little, because the number it is applied to has usually been cut substantially before you get there.

- The formula is taxable base × 1.4%, plus taxable base × up to 0.3% for city planning tax.

- The taxable base is not the same thing as the assessed value. It is the assessed value after the residential land special measure, new-build reduction, and any other relief have been applied — which is the single most misunderstood part of the whole system.

- Assessed value can be found in the valuation column of your annual tax notice. As a rough guide it runs around 70% of published land price.

- Assessed values are revalued once every three years. The most recent revaluation was fiscal 2024, and the next falls in fiscal 2027. Buildings generally decline in value with age, but land can rise — and given recent urban land price growth, the 2027 revaluation may push a lot of city valuations upward.

- Buildings depreciate against a schedule, but never to zero. There is a floor, so an old building keeps generating a small annual bill indefinitely.

The residential land special measure

This is the most valuable relief in the entire system, and it is also the reason so many empty houses in Japan are never torn down.

- Land under a dwelling is cut to one-sixth of assessed value for the first 200 sqm, and one-third for anything above 200 sqm.

- City planning tax gets a parallel but smaller cut — one-third for the first 200 sqm, and two-thirds above it.

- It applies automatically for as long as a dwelling stands on the land, with no application needed.

- There is no expiry date attached to this measure.

- For condominiums, the test is applied to your apportioned share of the site. Most units come in under 200 sqm, so the one-sixth rate normally applies to the whole share.

- Where a site measures 250 sqm, the first 200 sqm is treated as small-scale residential land and the remaining 50 sqm as general residential land.

- Land that is vacant, land where a house is merely planned, and land under a house currently being built do not qualify. Nor do the sites of shops, offices, factories, warehouses, hotels, or commercial car parks.

- The catch that everyone eventually hears about: demolish the building and the one-sixth relief disappears, so the land tax can jump sixfold the following year. This is widely cited as one cause of Japan's vacant house problem.

- Since 2015, a property formally designated as a specified vacant house under the vacant property legislation also loses the residential land relief. Poorly maintained empty homes are no longer a safe way to hold the discount.

The new-build reduction

- Fixed asset tax on a newly built dwelling is halved for 3 years, or 5 years for condominium-type buildings.

- For a certified long-term quality home, the period runs 5 years, or 7 years for condominiums.

- The reduction applies to the residential portion up to 120 sqm of floor area. Anything above that is taxed in full.

- The 2026 tax reform extended the measure by five years, so homes built through 31 March 2031 qualify.

- From April 2026 the floor area requirement changed to 40–240 sqm. The lower bound came down from 50 sqm, bringing smaller homes into scope, but the upper bound also fell from 280 sqm — so some larger houses that previously qualified no longer do.

- The residential portion must make up at least half the building.

- The reduction is applied automatically for ordinary new builds, but the long-term quality home version has to be claimed. That claim is due by 31 January of the year following construction, with a copy of the certification attached.

- Plan for the cliff edge. In year four — year six for condominiums — the amount returns to normal. This is not a tax increase; it is the discount ending. The building portion of the bill simply doubles from that year.

A worked example

- Land assessed at ¥20M, qualifying as small-scale residential land: ¥20M × 1/6 = ¥3.33M taxable base, × 1.4% = roughly ¥47,000. City planning tax on the same land: ¥20M × 1/3 = ¥6.67M, × 0.3% = roughly ¥20,000.

- Building assessed at ¥10M, with no new-build reduction running: ¥10M × 1.4% = ¥140,000, plus ¥10M × 0.3% = ¥30,000 in city planning tax.

- Combined annual bill in that example: about ¥237,000.

- A more typical new condominium — land share assessed at ¥10M, building at ¥15M — comes to roughly ¥130,000 a year with both reliefs running, or about ¥11,000 a month.

- Note the shape of it: the land contributes very little once the one-sixth relief is in play, and the building carries most of the bill. That is the opposite of what most buyers expect.

Exemption thresholds

- No fixed asset tax is charged where an owner's total taxable base within a single municipality falls below ¥300,000 for land or ¥200,000 for buildings. It is rare for ordinary residential property to land under these figures.

- From fiscal 2027, the building threshold rises from ¥200,000 to ¥300,000 and the depreciable asset threshold from ¥1,500,000 to ¥1,800,000. The land threshold stays at ¥300,000, because land prices are still below their 1991 level.

- The thresholds are tested per municipality, on the combined total of everything you own there — not property by property.

Renovation reductions

Several types of qualifying work earn a reduction on the following year's building tax.

- Seismic retrofitting, energy efficiency work, and barrier-free accessibility work all qualify.

- The typical reduction is one-third of the following year's building tax.

- These are not automatic. A claim must be filed with the municipality, generally within 3 months of completion and in any case by 31 January of the year following the work. Miss the deadline and you lose the entire year's benefit.

- Seismic work in particular is strictly held to the 3-month window in many municipalities, so start the paperwork as soon as the contractor's documents are ready.

- For work completed from April 2026, the post-renovation floor area requirement is 40–240 sqm; previously it was 50–280 sqm. The building must be at least 10 years old.

Paying it

- Notices go out between April and June, depending on the municipality.

- Payment is in four instalments, or in a single lump sum if you prefer. In Tokyo's 23 wards the four due dates fall in June, September, December, and February.

- Bank transfer, direct debit, credit card, and smartphone payment services are all accepted in most municipalities.

- For a newly built house, the first bill arrives in the fiscal year after the first 1 January on which you owned it — so there is a gap of up to a year between moving in and paying anything.

- If paying is difficult, contact the municipality early; instalment arrangements are usually possible. Ignoring it accrues penalty interest and can ultimately lead to seizure, though the process is gradual rather than immediate.

If you think the valuation is wrong

- You can file for review with the local fixed asset valuation review committee. This is generally only available in revaluation years, and the deadline is 3 months from the date you receive the tax notice.

- With fiscal 2027 being a revaluation year, anyone who believes their valuation is out of line should be ready to act quickly once that year's notice arrives.

- Check the notice against reality every year regardless. Errors in recorded floor area, building use, or whether land is flagged as residential do occur, and they persist quietly until someone points them out.

Points worth flagging

Investors and landlords

- Rental apartment buildings qualify as dwellings, so the residential land relief and the new-build reduction both apply. This is a meaningful difference from acquisition tax, where used-home relief is denied to investors.

- Mixed-use buildings qualify for land relief so long as at least a quarter of the floor area is residential, with the qualifying land area scaled to the residential proportion.

Commercial and hospitality assets

- Sites of shops, offices, factories, warehouses, hotels, and inns are non-residential land. No one-sixth relief, no new-build reduction on the building.

- The practical consequence is that annual carrying cost on a commercial asset is several times that of a residential asset of the same assessed value.

Car parks and vacant land

- Monthly and coin car parks, materials yards, and vacant plots — including land held for future construction — are all non-residential.

- A private car park attached to and used as part of a residential property does keep the relief.

Business owners

- Depreciable business assets — equipment, fixtures, machinery — are a third category taxed alongside land and buildings, and require an annual self-assessment filing by 31 January. Property investors with fit-out or equipment in a building may fall into this without realising.

Rebuilding

- Land with a house under construction or merely planned as of 1 January does not normally qualify as residential land. There is an exception where an existing home is being demolished and rebuilt, but the relief only continues if you file the declaration.

- Whenever you build, extend, demolish, change a building's use, or change how land is used, a residential land declaration should be filed.

Quick reference

Owner-occupied house on its own plot

- Land: assessed value × 1/6 (first 200 sqm) × 1.4%, plus × 1/3 × up to 0.3%

- Building: assessed value × 1.4%, halved for the first 3 years if newly built

Condominium unit

- Land share: usually assessed value × 1/6 × 1.4%

- Building: assessed value × 1.4%, halved for the first 5 years if newly built

Rental apartment building

- Land: assessed value × 1/6 up to 200 sqm, × 1/3 above, × 1.4%

- Building: assessed value × 1.4%, halved for the first 3 to 5 years if newly built

Hotel, office, shop or other commercial building

- Land: assessed value × 1.4% — no relief

- Building: assessed value × 1.4% — no relief

Vacant land or car park

- Land: assessed value × 1.4% — no relief

Land where the house has been demolished

- Land: assessed value × 1.4% from the following year — relief lost, bill up to six times higher