Both the Komeito political party and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) are seeking that property taxes for commercial land receive some kind of tax relief next year. The leading Liberal Democratic Party also seems to be in favor of this measure.
In Japan, annual property taxes are called fixed asset taxes (kotei-shisan-zei) and are local taxes charged to property owners. The taxes are typically 1.4% of the fixed asset valuation, which is usually much lower than the market price in urban areas. The 1.4% is the most common tax rate, although some cities and jurisdictions may have slightly different percentages.
The taxes are adjusted once every three years to account for any changes in property values. This year was one of those adjustment years, and in an effort to reduce the increased tax burden on businesses and homeowners in the midst of the pandemic, the property taxes in 2021 were kept at the same level as those in 2020. However, if these same measures are not continued in 2022, approximately 60% of commercial land sites in Japan will see taxes rise next year.
Since the economy has not fully recovered from the effects of the pandemic, the government is likely to continue to provide relief measures for owners of commercial land, but not for residential land.
To avoid any steep tax hikes on property owners in times of rising real estate prices, the tax burden adjustment rate is 5% of the increase in the tax value. The proposal for 2022 could see this increase capped at 2.5%, resulting in less of a burden for commercial landowners.
Sources:
TV Asahi, December 8, 2021.
The Sankei Shimbun, November 28, 2021.
