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Real estate investment and tax saving in Japan

Real estate investment and tax saving in Japan

Some persons who receive excellent salary sometimes purchase old wooden house for their investment.
They purchase a house and rent it out or operate Inn business.

Because, depending on situation, they can reduce amount of tax in Japan.

As for Income tax (shotoku zei) in Japan

Assumed that your salaried income in Japan is 15 million yen.

In the case of 15 million yen, employment income deduction (きゅうよしょとくこうじょ)is about 2.2 million yen.

And income deduction (しょとくこうじょ) is about 1.93 million yen.
(Breakdown : basic deduction : 380000 yen. Social insurance deduction is 1.55 million yen)

15 million yen – 2.2 million yen – 1.93 million million yen = 10.87 million yen.

10.87 million yen is taxable income of income tax.(かぜいしょとく)

10.87 million yen × 33% (income tax rate) – 1.53 million yen (deduction) = about 2.05 million yen.

2.05 million yen is amount of income tax.

Regarding resident tax (Juminzei) in Japan

In the case of 15 million yen, employment income deduction (きゅうよしょとくこうじょ)is about 2.2 million yen.

And income deduction (しょとくこうじょ)is about 1.88 million yen.
(Breakdonw basic deduction : 330,000 yen. Social insurance deduction is 1.55 million yen)

15 million yen – 2.2 million yen – 1.88 million yen = 10.92 million yen.

10.92 million yen is taxable income of Resident tax.(かぜいしょとく)

10.92 million yen × 10% (resident tax rate) = about 1.09 million yen.

1.9 million yen + 7000 = 1.1 million yen.

This 1.1 million yen is amount of resident tax.

Real estate investment and tax saving in Japan 1

On the other hand, in the case you purchase old wooden house and renting out, you can apply for depreciation cost.

So, if the amount of depreciation cost is 1 million yen, you may be able to reduce your taxable income by 1 million yen.

Total rate of income tax and resident tax is about 40% in above case.

So, 1 million yen × 40 % = 400,000 yen will be your tax if you do not start real estate investment.


If you purchase a real estate and reduce amount of taxable income by 1 million yen, you do not need to pay this 400,000 yen.

On the other hand, when you sell the real estate after 5 years from your purchase, you need to pay income tax and resident tax.

However, in the case income tax and resident tax, caused by sale of real estate, total rate of income tax and resident tax is 20%.

So, if you start real estate investment, you may be able to receive some tax merit.

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