Vol.39 - Taxes on Real Estate Part II
**CONTENTS**
-From the Editor
-Yen Watch
-Events
-Job Watch
*Please scroll down below to read the disclaimer*
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Taxes on Real Estate Part II
Again, I’d like to acknowledge the valuable contribution of Grant Thorton’s Paul Previtera in making this article possible. Today we talk about taxes on rental income and sale of your property. Please remember, that before acting on any information in this article, you should get the advice of a proper tax consultant.
Renting out property may sound like a good idea, but once you look at both the cost of money and tax, you might have second thoughts and start an Internet business instead! Remember that banks don’t make home loans for property you plan to rent out. Of course there are various degrees of subtlety that let you massage this position a bit, such as renting out rooms to students, or even letting immediate family live there and having them pay you something on the side. But read your loan contract carefully, because it will normally be very restrictive about just who can live in your premises in order for you to get a low-interest housing loan.
If you decide that renting is the way to go, then apart from loan restrictions, the main issue is tax. On income from property rental, you are levied at the same rate as other income that you might earn. This extra income is included in your gross income figure and taxed at the marginal rate, which ranges from 10% to 50% depending on your base income. The same as for Australia (“negative gearing” concept), you can claim the costs of maintaining the rental property as deductions on your rental income.
If you are a non-resident individual receiving rental income from Japanese real estate and which is being paid within Japan, then you are required to file a Japanese tax return. You will pay tax at the applicable marginal rate - ranging between 10% and 37% (37% being the highest). The tax levels are substantially lower than for residents since you do not have to pay local taxes.
If you are a non-resident being paid overseas (versus in Japan), then you will pay a flat 20% withholding tax. It is the responsibility of the leasee to deduct the withholding tax and pay it to the tax office. Note that the withholding tax applies irrespective of whether you have other Japan income or not - it is the cross-border component that invokes the withholding requirement. In any case tax hit can be credited against income tax if you are earning other taxable income in Japan - just make the claim on your Japanese tax return.
Probably of greater interest to readers is what happens when you sell your property, ready for the big move back home (overseas), or to upgrade to somewhere better. Basically the Japanese tax office considers 5 years as being the point at which you have shown commitment as an owner, rather than behaving like a speculator. Accordingly, the tax rate for property held for more than 5 years is 20% flat and for property held less than 5 years is 39%. This is a big difference, and points to the fact that in terms of home loans, the minimum term loan you should be looking at is 5 years. This capital gains tax is levied independently of your other income and thus is not affected by it.
If you are non-resident and selling, then if you are earning in-country income in Japan your tax rates will be 30% for 0-5 years, and 15% for 5 years or more. If you’re not earning income in Japan, then you pay 10% withholding tax on the capital gain.
If you want the real last word in Japanese tax, check out:
http://www.mof.go.jp/english/tax/taxes2005e_c.pdf
Terrie Lloyd
・・・Investor in Training/
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| Currency | 3/6 Mon |
3/7 Tue |
3/8 Wed |
3/9 Thu |
3/10 Fri |
| USD | 117.52 |
118.63 |
118.69 |
118.74 |
119.35 |
| GBP | 207.72 |
208.09 |
206.88 |
207.27 |
208.07 |
| EUR | 142.32 |
142.60 |
141.29 |
142.09 |
142.32 |
| CAD | 104.21 |
104.71 |
103.88 |
103.44 |
103.51 |
| HKD | 15.43 |
15.57 |
15.57 |
15.58 |
15.65 |
| SGD | 72.75 |
73.17 |
73.05 |
73.11 |
73.48 |
| AUD | 88.88 |
88.90 |
88.16 |
88.43 |
88.89 |
(The above TTS Exchange Rates has been brought to you by the courtesy of GoLloyds TSB)
The above rates were posted at 10:09 on Friday, March10, 2006 and are valid for funds received before 3:00 pm on Friday, March 10, 2006. All funds received after 3:00 pm are remitted the following day at the following day's exchange rates. The exchange rates provided are intended only as a guide. The Bank reserves the right to apply a different exchange rate if the market is particularly volatile.
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ICA EVENT
March 22, 2006
Speaker: Brian Mitchell, Senior VP, Strategy, Business Planning and Mergers and Acquisitions, for Asia Pacific and Japan, Oracle Corporation
Topic: The Rapid Consolidation and Evolution of the Global Software Industry
Details: Complete event details at http://www.icajapan.jp/ (RSVP Required)
Date: Wednesday, March 22, 2006
Time: 6:30 Doors open, buffet dinner included
Cost: 3,000 yen (members), 5,500 yen (non-members), Open to all - Location is Foreign Correspondents' Club
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Foreign Executive Women (FEW)
Apr 22, 2006
presents the 14th Career Strategies Seminar aimed at foreign women who are seeking to achieve success in their careers in Japan.
Inspirational presentations will be made by foreign professional women who have made their mark in the Japanese business world. In addition to the keynote speeches, there will be a series of interactive workshops which will provide in-depth information on selected industries and fields.
Date: Saturday, Apr 22 2006
Time: 9:00am – 6:00pm.
Venue: Temple University, Japan
For information and to register,
email [email protected] or visit http://www.fewjapan.com
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February 10, 2006 | Permalink | Comments (0)
