Japan Tax & Accounting provides investors with accounting and tax information about the real estate investment in Japan.

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4. Japan tax at the time of selling – Capital Gain (Continued)

4.1.4 Cost for transfer

Cost for transfer means cost to transfer (to sell) the property, except cost for acquiring the property.

  1. Purchase commissions, transportation fee, surveying fee, stamp tax, fee for preparation of deed of sales contracts, and other expenses for transferring the property
  2. Compensation for eviction, expenses for demolition, penalty for selling the property with better condition
  3. Cost for demolition or removal to transfer the land as loss
  4. Cost for civil cases relating to establishment of the contract of transferring the property when dispute occurred

Note: Cost cannot be included to the cost for transfer are repair cost, fixed assets tax, and cost for cancellation of mortgage

4.1.5 Holding period (long-term/short-term)

Capital gains are divided into two categories by the holding period.
Long-term: Owning the property for more than five years as of 1 January of the year in which transfer was made.
Short-term: Owning the properties for not more than five years as of 1 January of the year in which transfer was made.
Note: Date of acquisition and Date of transfer
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4.1.6 How to Calculate Capital Gains

Divide total capital gains into two categories by the duration of holding, then calculate with the method following.

4.1.6.1 Short-term Capital Gain

4.1.6.1.1 Formula for calculating amount of short-term capital gains subject to taxation

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4.1.6.1.2 Tax calculation

  1. General short-term capital gain
  2. Income tax:
    image022
    Resident tax:
    image023
  3. Short-term capital gain with special reduction (transfer to National and local governments etc.)
  4. Income tax:
    image024
    Resident tax:
    image025

4.1.6.2 Long-term Capital Gain

4.1.6.2.1 Formula for calculating amount of long-term capital gains subject to taxation

image026

4.1.6.2.2 Tax calculation

  1. General long-term capital gain
  2. Income tax:
    image027
    Resident tax:
    image028
  3. Long-term capital gain with deduction for development of good residential land (applies to capital gains from 1 January, 2004 to 31 December, 2016)
  4. Amount of long-term capital gains subject to taxation is 20 million or less:

    Income tax:
    image029
    Resident tax:
    image030

    Amount of long-term capital gains subject to taxation exceeds 20 million:

    Income tax:
    image031
    Resident tax:
    image032

    Note: The percentage inside ( ) is with the tax rate for special income tax for reconstruction (Amount of income tax x 2.1%) which levies from year of 2012 until 2037.

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