Glossary

Acquisition tax (“fudosan-shoe-toku-zei”不動産取得税) is a local tax levied to individuals or entities that acquire real estate property, including land and buildings. The acquirer will be notified by the local tax office within 1 - 3 months after purchase, if there are any acquisition taxes to pay. However, for certain types of property acquisitions may be eligible for exemptions or reductions, such as, newly built residential properties, and if applicable, there may be no tax imposed.

Flat 35 (“flat-35”フラット35) is a mortgage loan that offers a fixed interest rate for the entire duration of the loan, up to maximum of 35 years. It is a loan provided through a collaboration between financial institutions and the Japan Housing Finance Agency. Since Flat 35 loans do not require the borrower to sign up for group credit life insurance, individuals with health issues who cannot take out a loan from private financial institutions for this reason can still qualify with Flat 35. Additionally, business owners who face challenges in borrowing from private financial institutions due to their business still being in the growth phase and not yet profitable may also be able to secure a Flat 35 loan. However, the business owner’s taxed income must correspond with the desired loan amount, and other conditions must also be met.

Zoning (“yo-to-chi-iki”用途地域) is the government's determination of the types and sizes of buildings that can be constructed in 13 classified areas, each separated by their intended use. The objective of classifying these areas is to develop a city in an orderly fashion, ensuring that residential, office, commercial, and public facilities can coexist harmoniously.

Homeowners association（”kanri-kumi-ai”管理組合）is an organization formed by all property owners of a building. It operates based on a set of governing documents that outline the community's rules and the responsibilities of the homeowners association and its members. The homeowners association is typically managed by a board of directors elected by the homeowners. The board is responsible for making decisions on behalf of the community, managing finances, and ensuring compliance with the governing documents. Monthly dues are required from each homeowner to pay to a bank account under the name of the homeowners association, which are used for the upkeep and use of common areas on a day-to-day basis. Additionally, funds are pooled into a sink fund, which is used for scheduled large-scale repairs at fixed intervals according to a long-term repair plan.

Long-term repair plan(“choki-shuzen-keikaku”長期修繕計画) is a plan that determines the kind of maintenance work necessary for the common areas of the building every 12 – 15 years. This includes work like painting, waterproofing, exchanging deteriorated wall tiles and floor sheets, updating fittings, plumbing, wirings, and other essential repairs. The objective of this periodical maintenance work is to maintain the quality and value of the apartment and to extend its life span.

The earthquake code (耐震基準, "taishin-kijun") is a building code established under the Building Standard Act, which dictates the required sturdiness of buildings to ensure safety during an earthquake . The code has been updated periodically in response to unprecedented earthquakes. A significant revision was introduced in 1981, and buildings that received construction certifications after June 1, 1981, comply with this new standard. Buildings constructed before this date adhere to the older code. The 1981 code remains in effect today and is designed to prevent collapse during an earthquake of Shinto scale 6-7. For single-family homes, the most recent update to the earthquake code was introduced in 2000.

Setback ("setto-bakku" セットバック) is required when developing a house if the existing front road of the lot is less than 4 meters wide, or if the centerline of the road is less than 2 meters from the lot (or more if stipulated otherwise). The landowner must give up land space to make up for the deficit, or the city will not allow any development to proceed. If there are no plans for development, a setback is not required and only becomes necessary when development is planned.

Bridge loan ("tsuna-ghee-you-shi"つなぎ融資) is a short-term loan that is expected to be paid back in a lump sum soon after the borrower has arranged for a long-term loan. This type of loan is commonly used when people are repurchasing their home and have found a new house before selling their current one. Since they need to come up with the money that was supposed to come from selling their house, the bridge loan serves as a second loan, which must be paid back with the proceeds from the sale of their current house. Bridge loans generally have a higher interest rate than regular home mortgage loans, and the loan term is usually 1 year at the most.

Post-Sale Occupancy ("he-ki-watashi-yuyo"引渡猶予) occurs when the buyer allows the seller to stay in the property even after ownership has transferred. An example might be when the seller is purchasing a new home and prefers to move directly from their current home to the new one, rather than moving out and then moving again. This situation can arise if the purchase of the new home occurs after the sale of the current one is completed. During the post-sale occupancy period, the seller is typically required to practice due diligence in maintaining the property and keep their housing insurance active until they vacate the premises entirely.

Withholding tax (“gensen-choshu-zei”源泉徴収税) is a tax imposed on non-resident who sell or rent out their property in Japan. This withholding tax serves as an advance payment towards the non-resident’s potential income tax liability. If any withholding tax has been withheld, the non-resident or non-resident’s appointed tax representative will need to appropriate the sufficiency or insufficiency by filing income tax returns between February 16 and March 15 of the year following the earned income year. However, under certain circumstances, withholding tax may not be required, so it is necessary to check whether the non-resident is subject to this tax or not.

​

Tax Representative (“no-zei-kanri-nin” 納税管理人) is an individual or entity appointed by a non-resident property owner to manage all tax-related matters in Japan. This role is critical in various scenarios. For instance, when a non-resident acquires real estate in Japan, an acquisition tax is typically imposed 1–3 months after the purchase, depending on specific conditions. The tax representative handles the necessary procedures related to this tax. If the property is sold or rented out, withholding tax may apply under Japan’s income tax laws. In such cases, the tax representative ensures accurate accounting of the withholding tax by filing the non-resident’s income tax returns during the annual tax filing period, which occurs from February 16 to March 15 of the year following the income year. Furthermore, the tax representative is responsible for managing the payment of annual property taxes on behalf of the non-resident property owner.

Income tax returns (“kakutei-shin-koku”確定申告) in Japan are filed during February 16 to March 15 of the year following the property transaction. This applies to individuals who have had income taxes withheld when selling their property, or for those who have gained from their real estate property. Additionally, even for individuals who were eligible for tax exemptions, such as, when gaining through selling their primary residence, still need to file tax returns to report the exemption.
 

Withholding tax slip (“gensen-choshu-hyo”源泉徴収票) is a document issued from an employer summarizing the amount of income paid during the year between January 1st to December 31st. The withholding tax slip confirms the amount withheld and allows the employee to report the information accurately in their tax filings.

 

Income tax certificate (“kazei-shomei-sho”課税証明書) is an official document issued by a resident’s local ward or municipal office in Japan. It certifies the individual's income, the amount of resident tax paid, and the status of dependents for a specific calendar year, from January 1 to December 31. These certificates are usually available from June 1st of the year following the income year. When applying for a mortgage loan, the bank often require this statement to verify the applicant’s income and tax payment status.

Primary residence (“jiko-no-kyo-ju-yo”自己の居住用) refers to the place where an individual or family primarily resides and considers their main home. It inevitably means the place which one registers as their home address at their local ward or municipal office. There are tax reductions and exemptions available when one buys or sells their primary residence, provided the real estate property meets certain requirements.

Non-resident (“he-kyo-jusha”非居住者) is a person who does not possess any properties in Japan, even an office or business facility, that can be used as a residence. When one is a non-resident, certain taxes may apply or not apply when selling or renting out real estate property, depending on specific conditions.

Round robin contract (“mochi-mawari-keiyaku”持ち回り契約) is a particular way of signing a contract where the contracting party takes turn signing the contract, not at each other’s presence. This method is often used when the contracting parties are geographically distant from one another.

Split fees（”sei-san-kin”清算金）are charges that are divided between the buyer and the seller based on their respective periods of ownership within the same year or billing period. These fees are apportioned to ensure that each party pays their fair share for the time they own or use the property. For example, with property taxes, the seller should pay the property taxes from the beginning of the real estate tax year until the date of closing, and the buyer should pay the real estate taxes due after closing. Other fees that may be split include monthly apartment fees, utility fees, rent payments if the property is leased, and more.

Capital gains tax ("jo-tow-zei" 譲渡税) is a tax imposed on individuals and corporations on the profit gained from the sale of their real estate property. Capital gain is calculated by subtracting the acquisition value, which can include the acquisition fee and conveyancing fee, from the sale proceeds, while also accounting for depreciation costs. Capital gains tax must be filed between February 16 and March 15 of the year following the sale at your nearest local tax office. There are certain exemptions and deductions available, such as the special deduction for selling a primary residence, which can reduce the taxable amount. Additionally, the holding period of your real estate, i.e., whether the gain is short-term or long-term, can affect the tax percentage imposed on the gained profit.

Representation agreement (“baikai-kei-yaku”媒介契約) is an agreement concluded between the seller and the real estate agent company when sellers sell their real estate property through the services of the agent company. There are 3 types of representation agreements that can be concluded, and they are distinguished by the validity period, exclusivity, and agent company’s duty of service.