2 Types of Ownership Rights
Just like many countries, ownership of property and the land are separate concepts and rights in Japan. Both types of rights are available for purchase for everyone, including foreigners.
Freehold
Freehold rights (Japanese: shoyuken) are the full ownership of the land and the structure(s) built on the land. In the case of apartment complexes and apartments, each unit comes with the ownership of a portion of the land where the building sits on. It is the most prevalent and prevalent and preferred form of ownership in Japan.
Leasehold
Leasehold rights (Japanese: shakuchiken) allow an investor to own a built structure (such as an apartment or building) while renting the land for a fixed term on which the structure stands. As such, leasehold usually requires the owner to pay an annual land rent to the land owner.
Different Leasehold Types
Since 1992, Japan has enacted a new leasehold regulation called "Normal Leasehold Law" or in Japanese "futsushakuchiken". Two different types of rights are given to leaseholders:
"Surface Rights (Japannese: Chijoken)"
It usually applies to leasehold apartments/condominiums and allows the leaseholder to freely sell or rent out the property.
"Rights To Lease (Japanese: Chinshakuken)"
It is usually applied to detached houses on leasehold land. The leaseholder is obliged to obtain the landlord's permission before transferring, sub-leasing, rebuilding, or redeveloping any structures on the land.
Things To Note
Under the "Normal Leasehold Law", lease terms are fixed to more than 30 years, regardless of the property type, and they can be renewed by the leaseholder. The first renewal term must be more than 20 years and any following term is confined to more than 10 years.
Landowners reserve the right for renewing the lease terms, but they must provide justification which details the intended use of the land.
PURCHASING COSTS & ADDITIONAL TAXES
Apart from price, additional costs have to be calculated when you made a purchase.
Stamp Tax is a tax levied on certain documents such as contracts, bills, and share certificates. In order to make a contract legitimate, a revenue stamp must be purchased and affixed to the contract, corresponding with the amount covered by the contract. Stamp tax rates can be found as below:
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"CONSUMPTION TAX A.K.A "SALES TAX" OR "VALUE ADDED TAX (VAT)"
It is a tax payable on almost any item bought in Japan, with the exception of certain types of transactions. Under Japan law, transactions on purchasing land are exempted from consumption tax, while transactions on the purchase of buildings and constructions remain. The current Consumption Tax rate in Japan is 10%. Normally, sales price is inclusive of the consumption tax.
"REAL ESTATE ACQUISITION TAX"
It is a one-time tax imposed at the time of acquisition of land and buildings. A notice for this tax will be issued from the corresponding prefecture between 6 - 18 months after the transactions is completed. (A special rate for residential building and land will be 3% and the valued price x 50% x 3% respectively before 31th March 2024, which is approximate to 0.5 - 0.8% of the sales price.)
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