Things to be aware of when renting real estate owned by non-residents in Japan

The definition of a non-resident is

• an individual who does not have an address or a place of residence (main place of residence) in Japan for more than one year continuously.

If a non-resident owns and rents real estate in Japan, they have to be aware of tax issues.

Income tax is withheld from the rent

Rental income from real estate in Japan owned by non-residents is subject to 20.42% withholding tax from the income amount.
(Except when the tenant is an individual and the property is used as a residence for the tenant or his/her relatives)

If the country of residence has a tax treaty with Japan, the withholding tax rate may be lower than usual or may be exempt depending on the content of the transaction.

However, for many tax treaties concluded with Japan, rent from real estate located in Japan is taxed in Japan, so withholding tax is withheld in accordance with Japanese domestic law.

Points to note that the owner does not have to pay the tax, as it is paid by the payer of the rent.

Tax return required

Non-residents must file a tax return in Japan for income earned from real estate in Japan.
(If a tax agent has been appointed in advance, the tax return will be filed through the tax agent. Anyone who is a resident of Japan, whether an individual or a corporation, can be the tax agent.)

The deadline for filing a tax return is from February 16th to March 15th of the year following the year of the income year.

For example, the tax return for 2024 must be filed by February 16th to March 15th, 2025.

The income deductions for non-residents (amounts that can be deducted in the calculation of taxable income) are limited to

・Disaster, theft or embezzlement loss deduction
(limited to losses on assets located in Japan)

・Donation deduction

・Basic deduction (up to 480,000 yen depending on income)

In addition, non-residents can file blue returns, so if the requirements are met, they can receive a 100,000 yen deduction or a 650,000 yen deduction.
（Advance application is required）

Since taxes are paid in advance at a relatively high withholding tax rate of 20.42% of the income amount, there are many cases where a refund can be received by filing a tax return.

Conclusion

In this article, I have written about things that non-residents should be aware of when renting out real estate they own in Japan.

Even if they are a non-resident, they need to be aware that they will have to pay Japanese income tax on any income they earn in Japan.(Whether they have to file a tax return or tax payment is completed by withholding depends on the type of income and their non-resident status)

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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