Capital Gains Tax on Property in Japan: 39% or 20%?

Short term vs long term: 39.63% or 20.315%

The capital gain, called jōto shotoku (jōto shotoku, transfer income), is not taxed under the progressive scale like rent: it falls under separate taxation (bunri kazei) at a flat rate that depends only on the holding period.

Holding period	Category	Total rate	Breakdown
≤ 5 years	Short term tankijōto shotoku	≈ 39.63%	income tax 30% + reconstruction surtax 2.1% of it + resident tax 9%
> 5 years	Long term chōkijōto shotoku	≈ 20.315%	income tax 15% + reconstruction surtax 2.1% of it + resident tax 5%

The gap is dramatic: the rate nearly doubles if you sell too soon. This is the single most important rule here. On a ¥10M gain (≈ €67,000), the tax swings from about ¥3.96M (short term) to ¥2.03M (long term) — nearly ¥2M (≈ €13,000) of difference.

The counting trap: 5 years measured to 1 January

Watch out for a subtlety that catches many resellers: the holding period is not counted date to date, but to 1 January of the year of sale.

In practice: the property must have been held for more than 5 years as of 1 January of the year you sell. A property bought in June 2021 does not reach long-term status in June 2026: you must wait until 1 January 2027. Selling in December 2026 leaves you short-term at ≈ 39.63%; waiting a few weeks drops the rate to ≈ 20.315%.

⚠ Common mistake to avoid

Many buyers think "I've held it 5 years, I'm fine." Wrong: it is 1 January that counts. Before any resale, check the exact crossover date — our buying support models this before listing.

How the capital gain (jōto shotoku) is calculated

The taxable gain is calculated as:

jōto shotoku = sale price − (acquisition cost − depreciation) − selling expenses

• Sale price (jōto kagaku): the net proceeds received.
• Acquisition cost (shutokuhi): the original purchase price + purchase costs (commission, taxes, shihō shoshi — see our property purchase costs in Japan). If you cannot prove the original price, the authorities use a flat 5% of the sale price.
• Depreciation (genka shōkyaku): the value of the building depreciates for tax over time; this already-consumed depreciation reduces the acquisition cost, which increases the taxable gain. Land does not depreciate.
• Selling expenses (jōto hiyō): sale agency commission, stamp duty, possible demolition costs.

This depreciation mechanism surprises people: on a long-held property, the taxable base can be higher than the simple purchase/sale difference. Run your figures through our simulator before selling.

Primary-residence relief: a ¥30,000,000 deduction

If the property sold is your primary residence (kyojū-yō zaisan), a major deduction applies: ¥30,000,000 (≈ €200,000) is subtracted from the gain before tax (tokubetsu kōjo). In other words, a gain below ¥30M on your main home can be fully exempt.

For long holdings (over 10 years), an additional reduced rate may apply to the portion above the deduction. Note: these benefits target the genuine primary residence, not a rental or second home. A non-resident investor renting out the property is generally not entitled to them.

Non-residents: 10.21% withholding and the France–Japan treaty

Withholding at source gensen chōshū

When the seller is a non-resident, the buyer (where they buy for over ¥100M or are a business) must in principle withhold 10.21% of the sale price and remit it to the Japanese tax office. This is not the final tax: it is an advance, reconciled through the seller's tax return kakutei shinkoku, from which any overpayment can be reclaimed.

France–Japan tax treaty

The France–Japan tax treaty (sozei jōyaku) prevents double taxation. As a rule, a gain on real estate is taxable in the country where the property lies — so Japan. France then eliminates double taxation (tax-credit or exemption mechanism depending on the case). In practice: you pay in Japan, then declare in France where a tax credit usually neutralises the second charge.

⚠ International tax is complex and personal: have your case validated by a tax adviser. See also our article on rental-income tax for non-residents and on the annual property tax.

In short: plan the date and the depreciation

Capital gains tax in Japan follows a simple but costly rule: ≈ 39.63% short term (≤ 5 years), ≈ 20.315% long term (> 5 years), with the 5-year count stopped at 1 January of the year of sale. Two reflexes: 1) never resell just before the long-term crossover; 2) keep every purchase and works invoice to raise the acquisition cost and cut the gain.

Primary residence: a ¥30M deduction. Non-resident: 10.21% withholding then reconciliation, with double taxation neutralised by the France–Japan treaty. Before selling, model the net in our simulator and get support to nail the timing.

Frequently asked questions

What is the capital gains tax rate on property in Japan?

About 39.63% if the property is held for 5 years or less (short term: income tax 30% + reconstruction surtax + resident tax 9%), and about 20.315% beyond 5 years (long term: income tax 15% + surtax + resident tax 5%). It is a flat, separately-assessed tax bunri kazei, independent of the rental-income scale.

How are the 5 holding years counted?

Not date to date: the period is measured as of 1 January of the year of sale. A property must have been held for more than 5 years as of 1 January of the year you sell to qualify for the long-term rate of about 20.315%. Selling a few weeks too early can almost double the tax.

Does depreciation increase the taxable gain?

Yes. The building's value depreciates for tax (genka shōkyaku); this depreciation reduces the acquisition cost used in the calculation, which mechanically raises the taxable gain. Land does not depreciate. On a long-held property the base can therefore exceed the simple purchase/sale difference.

Does a non-resident face withholding at the sale?

Yes, in principle 10.21% of the sale price is withheld by the buyer and remitted to the Japanese tax office. It is only an advance: the seller reconciles it via the tax return kakutei shinkoku and can reclaim any excess. Small sales to an owner-occupier buyer can be exempt.

Will I be taxed twice, in Japan and in France?

No, thanks to the France–Japan tax treaty. The property gain is taxable in Japan (where the asset sits); France then eliminates double taxation, usually via a tax credit. You declare in both countries but do not pay twice. Have your situation validated by a tax adviser.