When you sell a real estate (e.g. house, building or land), there will be Capital Gain Tax to pay. The tax rate is different for Short-Term Gain and Long-Term gain. If the sales happen before 5 years from its purchase, it’s Short-Term Gain. If it’s after 5 years, it is Long-Term Gain.
If the gain is for Short-Term, the tax rate will be 30% National Tax and 9% Municipal Tax. National Tax is charged to every body no matter whether you are a tax resident of Japan or a non-resident. Municipal Tax is only payable for a resident. If the gain is from Long-Term holding, the tax rate for National Tax is 15% and the rate for Municipal Tax is 5%.
A tricky part is it only counts from the date of its purchase up to January 1st of the year when a property is sold. For example, if a house was bought on February 1, 2018 and sold on April 1 of 2023, you may think it’s 5 years and 2 months and therefore it is a Long-Term capital gain. But it is not the case. Since it counts from the date of purchase up to January 1st of the year when it’s sold, it’s only 4 years and 11 months (11 months in 2018 and 4 years for 2019, 2020, 2021, and up to the end of December 2022).
30 million yen deduction from capital gain on sales of your home
If it was your home that you had a capital gain from, you will have a deduction up to 30 million yen. In another word, you will not have to pay the capital gain tax from your home sales if the gain is under 30 million yen. Note that the capital gain is sales minus the cost after depreciation expenses.
Depreciation expenses is to deduct one 33rd of the price of your house (excluding the price of its land plot) every year if the house is made of wood and you purchased a newly built. For example, the price you paid for your house was 50,000,000 yen. You need to split the price into the building portion (house) and its land plot. Let’s say the house portion was 30,000,000 yen and the land portion was 20,000,000 yen. You lived there for for 10 years. The depreciation expenses to be deducted from the cost is 9,090,090 (30,000,000 / 33 years * 10 years). Your cost of the house sales will be 20,909,909 yen. If your sales price was 55,000,000 yen, your capital gain is 14,090,090.
If it is an apartment (mansion in Japanese) made of steal and concrete, you will deduct one 70th of the cost of the building for the number of years you lived before your sales.