Real estate brokerage and agency services relating to property located in Japan are now generally subject to Japanese consumption tax, even when the customer lives overseas.
As a result, it is more important than ever for overseas property owners and investors to understand how Japanese consumption tax applies when purchasing, owning, renting, or selling Japanese real estate.
Previously, certain services provided to non-residents could qualify for an export exemption.
From October 1, 2026, brokerage and agency services relating to Japanese real estate generally no longer qualify for this exemption.
For example:
Non-residents are also subject to Japanese consumption tax rules when buying or selling Japanese real estate.
In general:
Therefore, when a taxable business operator sells an investment property, the building portion of the sale may be subject to consumption tax, even if the owner lives outside Japan.
When purchasing a property, the consumption tax paid on the building may be deductible as an input tax credit. However, special restrictions apply to residential rental properties.
Consumption tax paid on the acquisition of a residential rental building is generally not immediately creditable.
However, the treatment may differ where the property is used for taxable business purposes, such as:
In these cases, the consumption tax paid on the building acquisition may potentially qualify for an input tax credit.
The owner does not necessarily need to operate the accommodation business directly. A taxable lease to a hotel or minpaku operator may also qualify, depending on the actual use of the property and the contractual arrangements.
If a residential rental building is later converted to taxable use, adjustment rules may also allow part of the previously restricted input tax to be recovered.
To claim an input tax credit or obtain a consumption tax refund, the investor generally needs to be registered as a taxable business operator.
This election is subject to strict filing deadlines.
For an existing business, the election generally must be made before the relevant taxable period begins. In certain cases involving a newly established business, special filing rules may apply.
It is therefore generally not possible to wait until after the year has ended and then retroactively elect taxable status simply because a refund would have been available.
Assume a non-resident purchases:
If the property is used for long-term residential rental, the ¥5 million will generally not be immediately creditable.
If the property is used for taxable short-term accommodation, or leased under a taxable arrangement to an accommodation operator, the ¥5 million may potentially qualify for an input tax credit.
For this reason, both the intended use of the property and the investor’s consumption tax status should be carefully considered before the purchase.
For overseas investors, the consumption tax treatment can differ significantly depending on:
Once the property has been purchased—or once the filing deadline has passed—it may be too late to obtain a refund that could otherwise have been available.
Professional tax planning before the transaction can help investors avoid unnecessary tax costs and maximize available tax benefits.
If you are considering a real estate investment in Japan, we recommend reviewing the consumption tax implications before completing the transaction.
Our trusted team is available to assist with tax planning and compliance for overseas investors.
