The National Tax Agency's Current Framework
Under guidance reflecting legislation as of April 1, 2026, Japan's National Tax Agency explains that payments for Japanese real estate purchased from non-residents or foreign corporations are generally subject to withholding at 10.21%. The rule covers land, buildings and certain associated rights or facilities. Withholding obligations may apply to both corporate and individual purchasers. The seller's nationality alone does not determine whether the rule applies; tax residency status is the relevant consideration.
A Specific Exception for Residential Purchases
An exception applies where an individual purchaser acquires property for personal or family residential use and the purchase consideration does not exceed 100 million yen. Both the buyer's status and the intended use matter. Corporate acquisitions and investment purchases cannot automatically rely on this exception. As a result, two transactions involving similarly priced properties may have different withholding consequences depending on the buyer and the purpose of acquisition.
Consequences for Cross-Border Closings
Where withholding applies, the closing process must distinguish between the amount paid to the seller and the amount remitted to the tax authorities. The withholding amount is not necessarily the seller's final capital gains tax liability, and a separate tax return may be relevant. International property transactions therefore require attention to tax residency, contractual payment terms and settlement arrangements. The framework is especially relevant to overseas owners disposing of Japanese real estate and buyers acquiring property from them.