When foreigners purchase real estate in Japan, there are several important considerations to be aware of, especially regarding obligations and procedures after the purchase. It’s essential to understand these points in advance to avoid potential issues. Below are the key considerations for foreigners buying property in Japan.
1. Reporting Obligation to the Minister of Finance
When foreigners buy real estate in Japan, they may be required to report the purchase to the Minister of Finance under the Foreign Exchange and Foreign Trade Act (FEFTA). This reporting requirement applies specifically to non-residents purchasing property in Japan. The report must be submitted through the Bank of Japan within 20 days of the purchase.
However, reporting is not required in the following cases:
• You already reside in Japan.
• You are purchasing the property for residential use by family members or employees.
• You are buying property from another non-resident, and it’s not for residential use.
• The property will be used as an office.
• The property is acquired for non-profit purposes.
It is essential to check whether this rule applies to your situation and ensure proper reporting if required.
2. Tax Filing Obligations Related to Real Estate
Once a foreigner acquires real estate in Japan, they are subject to the same tax obligations as Japanese citizens. This includes paying real estate acquisition tax and property tax. Additionally, if you sell the property and make a profit, you will need to file a tax return for capital gains.
For foreigners living abroad, direct payment of taxes in Japan may not be possible. In such cases, you must hire a tax agent or work with a tax accountant to handle the necessary procedures. It is crucial to ensure proper tax management, especially if you are not familiar with the Japanese tax system.
3. Potential Issues with Money Transfers
Foreigners who do not have a Japanese bank account may face challenges with transferring funds when purchasing real estate. In particular, delays in international transfers could result in the funds not arriving in time for the settlement date, potentially causing complications in the transaction.
To avoid such risks, one option is to transfer the funds to a trusted representative or property management company’s bank account in advance. However, since this involves handling large sums of money, it is vital to thoroughly assess the trustworthiness of the representative or agent.
4. Appointing a Tax Agent
For foreigners who buy property in Japan but continue to live abroad, it is essential to appoint a tax agent. A tax agent will manage the payment of property taxes, real estate acquisition taxes, and handle tax-related documents and refunds on your behalf.
The tax agent can be either an individual or a corporation, but the appointment must be officially registered with the tax office and local authorities. Foreign investors who plan to manage their Japanese property from abroad should consult with a local contact or property management company to select a reliable tax agent.
Conclusion
Purchasing real estate in Japan involves navigating various legal and tax procedures. For foreigners, understanding the reporting obligations, tax filing requirements, and potential issues with money transfers is crucial to ensuring a smooth transaction. Consulting with professionals and preparing necessary arrangements in advance will help prevent complications and facilitate a successful real estate purchase in Japan.
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