You are currently viewing How to make Accounting Books for Real Estate Investment in Japan

How to make Accounting Books for Real Estate Investment in Japan

Japanese Real Estate Investment and Accounting Books 日本の不動産投資と会計帳簿

Blue and white tax returns 青色申告と白色申告

How do you become a Blue Return Filer?  青色申告者になるには?

Major benefits of filing a blue return  青色申告の主な特典

Journal Entry Examples – Property Tax

Journal Entry – Stamp Duty = Inshi Zei

Journal Entry – Registration fee

Journal entry examples – Acquisition Tax

Journal entry examples – Fire Insurance

Journal entry examples – Real estate brokerage fee

Journal entry examples – Post-purchase remodeling expenses

Journal entry examples – Pro Rata Rent (Hiwari Yachin)

Journal entry examples – Security deposit received

Journal entry examples – Depreciation expense

Journal entry for sole proprietorship 

How to make an Accounting Book for Real Estate Investment in Japan


You buy real estate in Japan, rent it out, and receive rent.

In that case, you have to calculate the amount of profit on your real estate investment and pay taxes on it.

You must then submit a tax return (called an income tax return) to the tax office each year and pay your taxes.

Of course, you do not have to pay taxes if your real estate investment did not generate any profit.

In order to calculate the amount of profit on your real estate investment, you will need to make accounting books (Kaikei Chobo).

Even if your real estate investment is not generating a profit (even if it is in the red), you still need to keep accounting books.

Therefore, Let me try to explain it as clearly as I can to you.

Let’s say it is now the year 2022.

In order for you to pay taxes on your real estate investments, you must calculate your profits and the amount of taxes yourself.
In this case, you will calculate the amount of profits on the real estate investment for the period between January 1, 2022 to December 31, 2022.

To calculate the amount of profit, you need to record the rent received (income) and expenses paid (expenses) from January 1 2022 to December 31, 2022. You need to record them in a excel file or something similar.

This excel file is called an accounting book.

You should keep this accounting book and related documents (lease contracts, receipts, etc.) for seven years.

Also, depending on the amount of rental income you receive, etc., you will be required to pay consumption tax.

If your rental income during 2020 exceeds 10,000,000 yen and the property you are renting out is an office (not renter’s residence), you may be required to pay consumption tax.
If you need to pay it for 2022, you will pay it in March 2023.

Here is a brief explanation of the meaning of blue tax returns(Aoiro Shinkoku) and white tax returns (Shiroiro Shinkoku).

When you prepare your accounting books, you use the double-entry bookkeeping method. You also submit an application to the tax office stating “I will be a blue filer. (within two months of starting to invest in real estate).

You then become a taxpayer, called a blue filer.

As a result, 100,000 yen will be deducted from the sales amount generated from your real estate investment. As a result, your tax amount will be reduced.

This 100,000 yen is called the special blue return deduction.

If the profit from real estate investment in 2022 is 1 million yen, the income tax rate will be 5 percent. Therefore, even if 100,000 yen is deducted from the profit from real estate investment, the benefit in tax reduction is only 5,000 yen.
(100,000 yen x 5 percent)

But there are other advantages to filing a blue return.

In the case of the blue tax return, losses can also be carried forward.

If you incur a loss on your real estate investment in 2022, you can carry that loss forward for three years.

Suppose you incur a loss of 1,000,000 yen on your real estate investment in 2022. You have a profit of 300,000 yen in 2023, and profit of 400,000 yen in 2024, and profit of 300,000 yen in 2025.

In this case, if you carry forward the loss of 1,000,000 yen for next 3 years, you will not have to pay income tax on your real estate investment from 2023 to 2025.

Also, if you invest in real estate and try to borrow money from the bank, you will need to prepare a balance sheet and income statement.

The advantage of real estate investing is the leverage effect of borrowing money.

On the other hand, white return filers cannot use a ¥100,000 income deduction (deducting of ¥100,000 from sales amount from real estate investments) or carry forward losses.

Instead, bookkeeping is simple. There is no need to create a balance sheet nor income statement.

But you will probably use accounting software on your computer to create your accounting books. Then it is not difficult to create accounting books called double-entry bookkeeping.

“Example of double-entry bookkeeping

29th November 2022 / cash 100 yen / rental fee 100 yen “

You would use a computer to create a double-entry bookkeeping system and would be a blue-return filer.

Ⅰ 白色申告者の会計帳簿とその記帳のしかた
I. Accounting Books and Recordkeeping Procedures for White Return Filers

(1) 記帳制度
(1) Bookkeeping System

If your real estate investment generates a profit in 2020 or 2021, you will need to keep a set of accounting books.

In that ledger, you should write down the amount of your income and expenses.

For white tax returns, accounting books can be prepared in a simple manner.

For example, you received 10 yen from your tenant Mr. Yamada on January 31 and you received 20 yen from Mr. Akiyama on January 31.

In this case, if you record

1月31日 山田さんから 家賃 10円
“Jan. 31 From Mr. Yamada, rent 10 yen

1月31日 秋山さんから 家賃 20円
Jan. 31 From Mr. Akiyama rent 20 yen “

it is troublesome to write

In this case, in the case of white tax return,

”1月31日 家賃 30円” と会計帳簿に書くことができる。
“”Jan. 31 – Rent 30 yen”” can be written in the accounting books.

However, if you file a white return you cannot use the methods to save taxes. So, in this instruction, I will try to explain how to file a blue return.

Ⅱ 青色申告者になるには?

Ⅱ How do I become a Blue Return Filer? 


In the blue tax return system, you create an accounting book, which requires a bit more work. The taxpayer then calculates the profits from the real estate investment based on those accounting books, and then pays the taxes.

1 青色申告の手続き

1 Procedures for filing a blue tax return


If you are going to start filing a blue tax return, you must submit an “Application for Approval of Blue Return for Income Tax” to the tax office by March 15 of the year you intend to start filing a blue return.

With the “Application for Approval of Blue Return for Income Tax”, you declare that you “want to become a blue return filer”.


Let’s assume that the current date is January 1, 2023. ♥


You started investing in real estate on May 1, 2022 (on a white tax return). And if you want to become a blue filer from 2023, you need to submit the document “I want to become a blue filer” to the tax office by March 15, 2023.


If you started real estate investment in the middle of the year and want to become a blue taxpayer from that year, you only need to submit the “I want to become a blue taxpayer” form to the tax office within two months of the start of your real estate investment.


In the example above, if you submit this document to the tax office by July 1, 2022, you can use the special blue tax return deduction for rental income during the year 2022.

2 青色申告の主な特典

2 Major benefits of filing a blue return 

(1) 青色申告特別控除
(1) Blue tax return special deduction

If you are a real estate lender and file a blue return, you can deduct up to 100,000 yen as a special blue return deduction.


This can reduce your taxable income.


In addition, if you are a blue filer and your real estate investment is business scale and you keep accounting books using double-entry bookkeeping, you can receive a deduction of up to 650,000 yen.


If you buy more than 10 apartments and rent them out to renters, you can qualify for the business scale deduction.

However, most people do not buy more than 10 apartments.

In the case of a detached house, you only need to rent out 5 or more houses.


(2) Carry-back of net loss


In the case of a blue return, in addition to carrying forward a net loss, it is also possible to carry back a net loss.


You were a blue filer in 2022 and 2023.


You paid 100,000 yen in March 2023 on profits from real estate investments in 2022.


In 2023, your real estate investment had a loss of 30,000 yen.


In this case, you can carry back the loss of 30,000 yen to 2022 and get 30,000 yen back from the 100,000 yen you already paid.


Now, let’s look at some specific journal entry examples 

Property Taxes

When you buy real estate (land and building), prorate settlement of property tax is performed.

Assumed that the purchase price of the real estate is 1000 yen (900 yen for the land and 100 yen for the building). The amount of property tax for one year is 365 yen. Then on April 25th you paid 1000 yen to the seller and took ownership of the real estate.

900 yen (land)
100 yen (building)
365 yen (annual property tax)
25th April

At this time, you pay ¥250 to the seller as a settlement of property tax (Seisan Kin=精算金=清算金).

Because, 365 yen is taxed the seller as property tax. 

That is the property tax for the period from April 25 to December 31 (there are 250 days from 25th April to 31st December).

You are owner on and after 25th April. So, seller hopes you to pay it on his behalf.

Formula: 365 yen x 250 days / 365 days = 250 yen

This 250 yen is included in the acquisition price of the real estate for accounting purposes.

This 250 yen is added to the purchase price of the land and building of 1,000 yen.

The formula for the property tax settlement for the building is: 250 yen x 100/1000 = 25 yen.

The formula for the property tax settlement for the land is 250 yen x 900/1000 = 225 yen.

Therefore, the price of the building is 100 + 25 = 125 yen

The price of the land is 900 + 225 = 1125 yen

The journal entries are

Building 125 yen / Savings account 125 yen

Land 1125 yen / Savings account 1125 yen

You will depreciate this 125 yen every year gradually.

Just in case, in Japanese language…..














建物 125円 / 普通預金 125円

土地 1125円 / 普通預金 1125円


Stamp Duty 

If you have a real estate sales contract in writing (i.e., if it is not an electronic document), you must affix revenue stamps to the sales contract. Stamp duty is paid by buying and affixing revenue stamps to the real estate sales contract paper. The amount of the stamp tax depends on the amount of real estate you’re buying and selling.

If the sales price of the real estate is 5,000,000 yen, you will affix revenue stamps worth 1,000 yen.

If the sales price of the real estate is 50,000,000 yen, you must affix 10,000 yen worth of revenue stamps.

The cost of buying these revenue stamps is an expense (deductible expense). In other words, you can reduce the amount of income and profit in the year of purchase. So, you can also reduce the amount of tax.

Journal entries

Taxes and dues (租税公課)10,000 yen / Cash(現金) 10,000 yen

Also, when you buy an investment property and pay the seller for it, you will receive a receipt from the seller.

You need to affix revenue stamps to the receipt as well.





租税公課 10,000円 / 現金 10,000円



Registration fees (registration tax, judicial scrivener’s fee)

When you acquire a property, you will incur registration costs (registration tax, judicial scrivener’s fee) to change the information on the registration to your name.

These costs are accounted for as necessary expenses (deductible expense).




Real Estate Acquisition Tax

About three to six months after you purchase a property you will receive a bill for real estate acquisition tax.
If you do not live in Japan, someone in Japan can receive it on your behalf.

You bought the property in December 2022. In April 2023, you received and paid the real estate acquisition tax bill (100 yen).

You can include this 100 yen as a deductible expense when calculating your income (profit from real estate investment) in 2023.

Journal entry:.
Taxes and dues 100 yen / Cash 100 yen





租税公課 100円 / 現金 100円

Fire insurance 

If you pay fire insurance premiums for two years, you will capitalize the following year’s portion as prepaid expenses (meaning that a portion of the premiums you paid will not be deductible in the year you paid them).

On July 1, 2023, you paid 24 yen for fire insurance premiums for the period July 1, 2023 through June 30, 2025.

In this case, ¥6 can be included in the 2023 expense (from July, 2023 ~ December 2023, there are 6 months).

Journal entry
July 1, 2023        Insurance premium 24 yen / Savings account 24 yen

Journal entry for settlement of accounts (Kessan Shiwake)
December 31, 2023           Prepaid expenses (前払費用=MaeBarai Hiyou)18 yen / Insurance premiums 18 yen

January 1, 2024

Premiums 18 yen / Prepaid expenses 18 yen

But it wouldn’t be much of a problem if you included the entire 24 yen in your 2023 expenses.
(The journal entry above is tedious)





2023年7月1日 保険料 24円/普通預金 24円

2023年12月31日 前払費用 18円/保険料 18円


保険料 18円/ 前払費用 18円


Real estate brokerage fee  

When you buy real estate, you will hire a real estate broker and pay her a broker’s commission (100 yen).

This 100 yen is not includable in deductible expenses (経費) and is included in the acquisition price of the real estate.

You bought a building in April 2023 for ¥900 (no land) and paid the brokerage fee of ¥100.

In this case, you would include ¥100 in the price of the building. This means that this ¥100 will not be deductible in the year 2023.

Journal entry
Building 1,000 yen / Cash 1,000 yen

This ¥1,000 will be depreciated every year.

不動産の仲介手数料 (just a translation)





建物 1000円 / 現金 1000円


Post-purchase remodeling expenses  

Suppose you bought a house that is still usable and you repaired the defects; you paid ¥700,000 in January 2023. You can include this ¥700,000 in your deductible expense for the year 2023.

But suppose you bought a building that is rundown and unusable, and paid ¥700,000 to make major repairs to make it usable. In other words, you increase the property value of the house. In this case, the ¥700,000 cannot be included in the 2023 deductible expense.
It should be capitalized as part of the price of the building itself.

If you capitalize the repair cost as part of the price of the building

Building 700,000 yen / Cash 700,000 yen

If you paid ¥199,999 to completely renovate your ramshackle and unusable home.

This ¥199,999 is a repair expense (修繕費=shuzenHi)and can be included in your 2023 loss.

journal entry
Repair expenses 199,999 yen / Cash 199,999 yen




建物 700,000円 / 現金 700,000円






修繕費 199,999円 / 現金 199,999円

Pro Rata Rent (Hiwari Yachin) 

You bought an investment property from Mr. Yamada on February 22, 2023. (The price of the real estate is 100 yen)

The tenant has already paid the rent (31 yen) for March 2023 to the seller, Mr. Yamada.

But you are entitled to this 31 yen.

Therefore, you will offset the 31 yen with the sales price you paid to Mr. Yamada.

Therefore, you will pay 69 yen to Mr. Yamada.

Journal entry

Cash 31 yen / Real estate income 31 yen








現金 31円 / 不動産所得 31円

Security deposit received 

The tenant has deposited a security deposit of 10 yen with Mr. Yamada (the seller).

You have taken over this security deposit from Mr. Yamada.

This 10 yen will be set off against the sales price you pay to Mr. Yamada.

Therefore, the 100 yen of the sales price is offset by the 10 yen of the security deposit you have taken over.

Therefore, you will pay 90 yen to Mr. Yamada.

Journal entry

Cash 10 yen / Deposit received 10 yen








現金 10円 / 預り金 10円

Depreciation expense 

You have purchased land and a building. You can account for depreciation expense on the building. The value of the building will gradually decrease as time goes by. Therefore, you can account for (book) the decrease in accounting book.

If you buy a 10,000,000 yen apartment for investment in 2023 and earn 1,200,000 yen from rental income, you cannot record the 10,000,000 yen as a deductible expense in 2023 at once.

Buildings are used for many years. So it is to be expensed over a number of years.

To calculate at what rate and at what speed the value of the building will decline, you need to find out the legal useful life of the building (法定耐用年数).

The legal useful life is the tentative life of the building. For a residential (i.e., not used as an office) wooden building, the useful life is 22 years.

For steel-framed reinforced concrete buildings such as apartments, the legal useful life is 47 years.

After 22 or 47 years, the value of the building is considered to be zero. (In fact, apartments built 50 years ago still fetch high prices.)


You purchase a wooden building that is 10 years and 6 months old.

Legal life of wooden building = 22 years = 264 months

10 years and 6 months = 126 months

264 months – 126 months x 0.8 = 163.2 months = 13 years

Therefore, the useful life of the wooden building you bought is considered to be 13 years.

The depreciation rate for a useful life of 13 years is 0.077.

On November 15, 2023 you bought a building for 100 yen.

100 yen x 0.077 x 2 months (November and December of 2023) = 15.4 yen

You can include this 15.4 yen as a deductible expense in the calculation of your real estate income in 2023.

Journal entry

November 15, 2023 Building 100 yen / Cash 100 yen

December 31, 2023 Depreciation expense 15.4 yen / Building 15.4 yen

January 1, 2024 Building 84.6 yen / Principal deposit (元入金)84.6 yen 



















2023年11月15日  建物 100円 / 現金 100円

2023年12月31日  減価償却費 15.4円 / 建物 15.4円

2024年1月1日  建物 84.6円 / 元入れ金 84.6円

You can also read “Depreciation of a building with mixed structures and purposes in Japan


akiyama(a)  Tomohiko AKIYAMA

If you want to ask me something relating to making accounting books in Japan, you can contact me.

If you need any help to purchase or sale real estate in Japan, you can send me an email.