When Buying, Review Acquisition Tax and Registration Costs Separately
Real estate acquisition tax is a local tax imposed by prefectures, while registration and license tax is a national tax charged on registrations such as ownership transfers and mortgage creation. The tax base may differ from the purchase price. Reduced rates for homes and land have requirements related to expiration dates, floor area, and construction year, so do not apply special rates from an outdated summary table without checking.
While Owning, Check Your Fixed Asset Tax Notice
As a general rule, fixed asset tax is charged to the person registered as the owner on January 1 each year. The standard tax rate and the ceiling for city planning tax may vary in practice depending on local government ordinances. Special provisions for residential land and reductions for newly built homes also have eligibility requirements and time limits, so check the tax statement issued by the local government where the property is located.
When Selling, the Date Used to Determine the Holding Period Matters
If the holding period as of January 1 of the year in which the land and building are sold exceeds five years, the gain is classified as long-term; if it is five years or less, it is classified as short-term capital gain. The general tax rates differ for long-term and short-term gains, and the special reconstruction income tax and local inhabitant tax must also be considered. If you lack documentation for acquisition costs and selling expenses, the taxable income calculation may change.
The 30 Million Yen Deduction for a Primary Residence Is Not Automatic
When you sell a qualifying primary residence, a special provision allows you to deduct up to 30 million yen from your capital gain regardless of the holding period. If the actual gain is less than the limit, only that amount can be deducted. You must meet requirements concerning residence and the timing of the sale, and file a tax return. You should also check whether transactions between family members or other special provisions affect eligibility for the deduction.
Review Inheritance and Gifts Separately from Transaction Taxes
Inheritance tax and gift tax are calculated based not only on one property but also on other assets, liabilities, and family relationships. You should not determine whether tax is due based only on the basic inheritance tax exemption or the annual gift tax exemption. If you are a nonresident or have tax obligations in both South Korea and Japan, you may need advice from professionals in both countries.