Japan Rental Income Tax for Non-Residents: Complete Guide

The principle: Japan taxes your Japanese rent first

Japanese tax law (the Income Tax Act, shotoku zei-hō) taxes non-residents on their Japan-source income (kokunai gensen shotoku) — and rent from a property located in Japan falls squarely within it. Tax treaties confirm the principle: income from real estate is taxable in the country where the property sits.

In practice, taxation happens in two steps:

• a possible 20.42% withholding tax deducted from the gross rent during the year;
• an annual tax return (kakutei shinkoku) that recalculates the tax actually due on your net income — and, in most cases, triggers a partial refund of the withholding.

Before worrying about tax, make sure the fundamentals of your purchase are sound: our guide to buying property in Japan covers the whole journey.

The 20.42% withholding tax: when does it apply?

The 20.42% withholding (20% income tax + 0.42% special reconstruction surtax fukkō tokubetsu shotoku-zei) is computed on the gross rent, before any expense. But it does not apply to every lease:

• Corporate tenant (a legal entity, hōjin) or rent paid in a business context: the tenant must withhold 20.42% and remit it to the Japanese tax office. Typical cases: a flat leased by a company to house an employee, or commercial premises.
• Individual tenant living in the property themselves or with their family: no withholding — you receive the gross rent.
• Short-term rental (Airbnb-style): platforms do not operate this withholding; the income still has to be reported on the kakutei shinkoku. On the operating rules, see our article on the 180-day minpaku licence.

Key point: the withholding is an advance payment, not a final tax. If the tax computed on your net income is lower than what was withheld, the excess is refunded after the annual return.

The annual return kakutei shinkoku: taxed on net income, not gross

Japan's income tax return, the kakutei shinkoku (kakutei shinkoku), is filed between 16 February and 15 March for the previous calendar year. It is assessed on net income: rent received minus all deductible expenses (detailed below).

The progressive scale runs from 5% to 45% (plus a 2.1% reconstruction surtax on the tax due). For an investor holding one or two properties, taxable net income is usually modest: the effective tax often falls below 10% of gross rent — far from the 20.42% possibly withheld.

The timeline in practice

1. Gather rent statements, invoices and the year's property tax notice.
2. Compute the building depreciation genka shōkyaku.
3. File the return (online via e-Tax or on paper), usually through your tax agent.
4. Pay any balance — or wait for the refund of the excess withholding.

The tax agent nōzei kanrinin: mandatory for non-residents

A non-resident cannot handle Japanese tax obligations alone: you must appoint a nōzei kanrinin (nōzei kanrinin, tax agent), an individual or company resident in Japan, notified to the tax office (zeimusho) with the form nōzei kanrininのtodokedesho.

• The agent receives your tax mail, files your returns and pays the tax on your behalf.
• In practice, most owners appoint a zeirishi (licensed tax accountant) — budget roughly ¥50,000–150,000 per year for a simple rental return (€330–1,000) — or sometimes their property management company.
• Also appoint a contact with the municipality to receive and pay the annual property tax notice.

Deductible expenses and depreciation genka shōkyaku: shrink the base

Tax is assessed on the net: every documented expense reduces the taxable base. Keep every invoice.

Deductible expense	Japanese term	Order of magnitude / note
Property management fees	kanri itaku-ryō	≈ 5% of rent for long-term lets, 20–30% for short-term
Property and city planning taxes	kotei shisan-zei・toshi keikaku-zei	1.4% + 0.3% of assessed value, fully deductible
Fire and earthquake insurance	kasai hoken・jishin hoken	annual premium (or the year's share of a multi-year premium)
Repairs and maintenance	shūzen-hi	deductible in the year of spending (major works are depreciated)
Building depreciation	genka shōkyaku-hi	wooden structure: 22 years (new), 4 years if older than 22
Professional fees	zeirishi hōshūなど	tax return, tax agent nōzei kanrinin
Tenant placement costs	chūkai tesūryō・kōkoku-ryō	agency commission and "AD" at each re-letting
Loan interest	kariirekin rishi	rare for non-residents (cash purchases); deductible where applicable

Depreciating a wooden building: the tax lever

Only the building depreciates — never the land. The statutory useful life (hōtei taiyō nensū) of a wooden structure is 22 years when new. For an older building, the remaining life is (22 − age) + age × 20%. And once the building is past 22 years, it drops to 22 × 20% = 4 years.

Example: a 35-year-old house whose building portion is valued at ¥8M (≈ €53,000) → you deduct ¥2M per year for 4 years, enough to wipe out much of the rental income for tax purposes. This is one of the attractions of an old machiya in Kyoto or a renovated countryside house.

Local property taxes and tax treaties: the full picture

Separately from income tax, every owner pays each year the fixed asset tax kotei shisan-zei (1.4% of the assessed value) and, in urbanised zones, the city planning tax toshi keikaku-zei (0.3%). Because the assessed value sits well below market price, the bill stays moderate — often ¥50,000–150,000 per year (€330–1,000) for a standard property — and both taxes are deductible from rental income. One perk of non-resident status: the residence tax jūminzei (≈ 10%) generally does not apply if you are not domiciled in Japan on 1 January.

On the home-country side: most treaties, including the France–Japan tax treaty of 3 March 1995, give Japan the right to tax real estate income; your country of residence then grants relief, typically a foreign tax credit. French residents, for instance, report the income on forms 2047 and 2044 and receive a credit equal to the corresponding French tax — no double taxation, though the income still affects the effective rate.

To estimate your after-tax yield before you buy, run your assumptions through our yield simulator; and if you prefer to delegate the whole structure (purchase, management, tax agent), our personalised support covers the entire journey.

Frequently asked questions

Do non-residents have to file a tax return in Japan every year?

Yes: the kakutei shinkoku return is filed between 16 February and 15 March through your tax agent nōzei kanrinin. Even when 20.42% was withheld at source, filing is in your interest: the tax is recalculated on net income, and the excess withholding is refunded.

Will my Japanese rental income be taxed twice?

No. Tax treaties allocate the taxation of real estate income to Japan; your home country then grants relief. Under the France–Japan treaty, for example, French residents declare the income and receive a tax credit equal to the corresponding French tax, so the rent is not taxed twice.

Does the 20.42% withholding apply if my tenant is an individual?

No — not when the tenant is an individual occupying the property as a home for themselves or their family. The withholding targets rent paid by a company (hōjin) or paid in a business context. In every case, the income must still be reported on the annual return.

How does depreciation work on a wooden house older than 22 years?

The statutory life of wooden structures is 22 years, so a building past that age is depreciated over 22 × 20% = 4 years. You deduct a quarter of the building value (excluding land) every year for 4 years — the powerful genka shōkyaku lever specific to older properties.

Who can act as my tax agent (nōzei kanrinin) in Japan?

Any individual or company resident in Japan: most often a zeirishi (licensed tax accountant), sometimes your property management company. The appointment is a simple form (nōzei kanrininのtodokedesho) filed with the tax office in charge of the property.