Overview
Every real estate owner in Japan—individual, corporate, or non-resident foreign investor—faces two principal annual property-level taxes: the Fixed Asset Tax (kotei shisan zei, 固定資産税) and the City Planning Tax (toshi keikaku zei, 都市計画税). Both are levied by local municipalities on January 1 each year based on statutory assessment values. These are recurring holding costs, payable annually regardless of income generation, and are independent of national income taxes on rent or capital gains.
Rosenka Valuation System (Triennial Cycle)
The assessment base for both taxes is the statutory appraisal value, known in Japanese as rosenka (路線価). Published by the National Tax Agency, rosenka establishes the per-square-meter assessed land value along each designated route or zone nationwide. Full valuation is conducted systematically only once every three years through a physical survey and appraisal process, with results serving as the tax base for the entire triennial cycle.
The most recent full revaluation was conducted in 2025, taking effect for 2026, 2027, and 2028. Reassessment will not occur until 2029 unless a qualifying change of use, subdivision, or major structural alteration triggers an interim adjustment. The 2025 rosenka reflected a 4.3% nationwide average residential land increase versus 2022, with Tokyo 23 Wards at 7.8% and Osaka City at 6.1%. Rosenka values consistently trail market values—urban residential land typically ranges 60–80% of actual transacted prices, reducing the effective tax burden.
Tax Rates: 1.4% Fixed Asset + 0.3% City Planning
The Fixed Asset Tax is levied at a national standard rate of 1.4% on total assessed value (land plus structures). Nearly all major cities apply the 1.4% standard rate. The City Planning Tax is capped at 0.3% and applies exclusively to properties within designated City Planning Areas, encompassing most urban and peri-urban land. Remote rural parcels and industrial zones outside master plan boundaries are exempt.
Combined, the maximum statutory rate on urban properties is 1.7% of rosenka value, though tiered residential land abatements substantially reduce this. For small-scale parcels (200 sqm or less), assessed land value is reduced by one-sixth for Fixed Asset Tax and by two-thirds for City Planning Tax. For the residential portion exceeding 200 sqm (up to building footprint × 10), a one-third abatement applies to both. The practical effect on a typical 120 sqm urban plot is an effective combined rate of approximately 0.35–0.45% of gross assessed value, before structure depreciation.
Structure Depreciation: RC vs Wood
The assessed value of improvements declines annually per a statutory depreciation table varying by construction method. For RC and SRC structures—mansion apartments and high-rise condominiums—the statutory useful life is 47 years. Depreciation follows a 200% declining-balance method initially, transitioning to straight-line in final years. An RC building loses approximately 3.5–4.5% of assessed structure value annually for the first 15 years, decelerating thereafter, with a 15–20% residual floor for well-maintained buildings.
For Wood-frame structures including detached houses and machiya townhomes, statutory useful life is 22 years, with steeper annual reductions of 6–7% in the first decade reflecting shorter structural lifespan and higher fire risk. Structural depreciation under rosenka is independent of income tax deductions—a property may be fully depreciated for income tax while still carrying positive assessed value.
5-Year NPO and Startup Relief
The tax code provides five-year relief for two categories, renewed under 2024 reform and effective through March 31, 2030. For registered NPOs (tokutei hieiri katsudo hojin), the five-year full exemption applies to land and buildings used for qualifying activities—social welfare, community centers, childcare, public-interest research. Application within 90 days of January 1 is required with evidence of 80%+ public-interest activity.
For certified startups—companies under 10 meeting innovation criteria—a five-year full exemption applies to office, lab, and prototype facilities, capped at ¥500 million per group with seven-year clawback provisions.
Vacation Home (Bessou) Second-Home Treatment
A critical distinction separates primary residences from secondary or vacation homes (bessou, 別荘) regarding residential land abatement eligibility. Under administrative practice, a property qualifies for the small-scale residential abatement only if designated as the taxpayer's juminhyo (住民票) registered domicile. Secondary properties, including resort-area vacation homes in Karuizawa, Niseko, Atami, or Izu, are explicitly excluded from the abatement regime regardless of owner-use frequency. The impact is substantial, with annual tax liabilities for bessou often running 3–4 times higher than equivalent primary residences. Some resort municipalities, including Niseko and Karuizawa, add 20–30% surcharges on second homes vacant 300+ days per year.
Inheritance Tax: Rosenka 80% Rule and Loan Coverage
The rosenka system also governs real estate valuation for inheritance tax (souzoku zei, 相続税) purposes. Under the Inheritance Tax Act, land is valued at the decedent's-date rosenka applied at a 20% discount—the "rosenka 80% rule." Combined with rosenka's inherent 20–40% market discount, inheritance land valuation typically falls 48–64% below fair market value, a meaningful advantage over assets valued at 100% of market.
This framework underpins the "rosenka 80% loan coverage" planning strategy: financing real estate with non-recourse or limited-recourse debt. Since liabilities deduct at 100% face value while the asset values at a 36–52% market discount, a leveraged portfolio can substantially reduce or eliminate the net taxable estate. Careful structuring is required: commercially reasonable terms, genuine collateral, documented financial institutions—not related-party lending, which the NTA routinely challenges.
Payment Calendar: February Advance and 4 Installments
Fixed Asset Tax and City Planning Tax bills are consolidated into a single annual notice issued in late April or early May to the owner's registered address, covering January 1 accrued liabilities. Four statutory due dates apply annually: a February advance payment, followed by April, July, and December installments. Exact dates vary by municipality, adjusted for weekends and holidays.
Owners may pay in full by the February date or in four installments with no discount for early payment and no interest surcharge for installment use as long as deadlines are met. Foreign non-resident owners without a Japanese address must appoint a resident tax agent (kouzei dairinin, 納税代理人) to receive notices and facilitate payment. Tax bills are not mailed overseas; failure to appoint an agent within 60 days of acquisition may trigger penalties or accelerated collection. Late penalties accrue at 2.5% per annum for the first two months and 8.7% thereafter, compounded daily.