The government is considering extending the fixed asset tax reduction on new homes for another two years. Currently, the annual fixed asset taxes are halved for the first 3 ~ 5 years on new homes and apartments. Unless extended, the special tax relief measure is set to expire at the end of March 2014.

There are concerns about a slump in new home sales following the planned increase in consumption tax from April 2014. As a result, the government is looking at measures to counter-act any possible downturn in sales activity. 

About the tax reduction

The tax reduction applies to new homes and apartments that have a floor area of between 50 ~ 280 sqm. The 50% tax reduction applies to the first 120 sqm of the total area. The tax break applies for the first three years, but for fire-resistant buildings over 3 storeys the tax break lasts for the first five years.

If you are buying a new property or one that is only a couple of years old, your annual fixed asset tax bill will be relatively low. However, be prepared to receive a bill that could be almost double your initial tax burden once the special term expires.

How to calculate your annual fixed asset and city taxes

Fixed asset taxes are 1.4% of the base taxation amount. In addition, you may also have to pay city planning tax of 0.3% of the base taxation amount. The base taxation amount is the property’s assessed value as recorded on the fixed asset taxation register. It is usually much lower than the market price or purchase price of your property.

If you are buying a brand new apartment, the developer should be able to provide an estimate of the annual tax. If buying second-hand, your agent should be able to provide a copy of the seller’s tax bill for the previous year to give you an idea of your future tax obligations.

The following is a sample of annual fixed asset and city taxes for homes and apartments in Tokyo:

  • House in Sanno, Ota-ku. Land: 286 sqm. House: 180 sqm. Built in 1982.
    Fixed asset tax: 194,806 Yen
    City planning tax: 47,067 Yen
  • House in Nishihara, Shibuya-ku. Land: 401 sqm. House: 412 sqm. Built in 1997.
    Fixed asset tax: 1,063,721 Yen
    City planning tax: 336,175 Yen
  • 26 sqm apartment in Roppongi, Minato-ku. Built in 1982.
    Fixed asset tax: 42,120 Yen
    City planning tax: 9,021 Yen
  • 37 sqm apartment in Nishi Shinjuku, Shinjuku-ku. Built in 2003.
    Fixed asset tax: 83,423 Yen
    City planning tax: 18,023 Yen
  • 102 sqm apartment in Shibaura, Minato-ku. Built in 2006.
    Fixed asset tax: 207,798 Yen
    City planning tax: 44,526 Yen

Source: FNN News, December 3, 2013.

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