The withholding obligation generally falls on the buyer
According to Japan's National Tax Agency, a person paying consideration to a non-resident individual or foreign corporation for land or buildings located in Japan must generally withhold income tax and special reconstruction income tax at a rate of 10.21%. The rule covers land, rights over land, buildings, attached facilities and structures. The obligation can apply to both corporate and individual buyers, making it a key closing issue when purchasing a condominium, house, land or income-producing property from an owner who resides overseas.
There is a limited residential-use exception
An individual buyer is exempt from withholding when the property is purchased for the buyer's own residence or that of relatives and the purchase consideration is ¥100 million or less. The ¥100 million threshold alone is therefore not sufficient; both the buyer's status and residential purpose matter. Withheld tax is generally payable by the tenth day of the month following payment. Where consideration is paid in a foreign currency, the amount must be converted into yen for withholding purposes under the NTA's currency-conversion rules.
The withholding amount is not necessarily the seller's final tax
The 10.21% withholding is calculated on the consideration paid and should not be confused with the final tax on the seller's capital gain. The final taxable gain can depend on acquisition cost, selling expenses and holding period, and a non-resident seller may ultimately reconcile the tax already withheld through a Japanese tax filing. As a result, the amount remitted to an overseas seller at closing may be significantly lower than the contract price. Sellers planning the use or overseas transfer of sale proceeds should distinguish the gross sale price, withholding, brokerage fees and other closing costs.