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Buying in Japan9 min read

Buying Japan Property From a Non-Resident Seller: The 10.21% Withholding Trap

If the seller of Japanese land or a building is a non-resident or foreign company, the buyer generally must withhold 10.21% of the payment and remit it to Japan's tax authority. An individual buyer can avoid that withholding only when the property is bought for the buyer's or a relative's residence and the purchase price is ¥100 million or less, so seller tax residency should be checked before the closing funds are fixed.

By Engawa Editorial Team
Japan property closing statement showing a 10.21 percent withholding line
When the seller is a non-resident, the buyer may have a Japanese withholding obligation at closing. Illustration from the Engawa Journal.

If the seller of Japanese real estate is a non-resident individual or a foreign corporation, the buyer can become the party responsible for Japanese withholding tax. The default rule is that the buyer withholds 10.21% of the payment; an individual buyer avoids that withholding only when the property is for the buyer's or a relative's residence and the price is ¥100 million or less.

That makes the seller's tax-residency status a closing question, not something to discover after the full purchase price has already been wired.

Why a buyer can have the tax obligation

Japan's National Tax Agency (NTA) treats consideration paid to a non-resident or foreign corporation for Japanese land, rights in land, buildings and associated structures as income that can be subject to withholding.

The unusual part for many overseas buyers is who must act: the payer of the purchase price is generally the withholding agent. The rule is not limited to Japanese companies or professional property businesses. The NTA states that individuals can also have the obligation.

In practice, that can affect the closing statement. If the rule applies to a ¥30 million payment, the buyer does not normally send ¥30 million to the seller and then find another ¥3.063 million for tax. The closing mechanics need to allocate the withholding from the payment correctly.

The individual-homebuyer exception is narrower than it sounds

The NTA gives an exception when an individual purchases the property for the buyer or the buyer's relatives to use as a residence and the transfer price is ¥100 million or less.

Both conditions matter.

A purchase can therefore fall outside the exception if:

  • the buyer is a company rather than an individual;
  • the property is being acquired as an investment or rental rather than for the buyer or relatives to live in;
  • the transfer price exceeds ¥100 million; or
  • the facts do not support the required residential use.

Do not reduce the rule to "cheap homes are exempt." The use condition is just as important as the price ceiling.

Worked examples

Example 1: ¥28 million home for the buyer to live in

An individual buys a house for ¥28 million from a seller who is a non-resident for Japanese tax purposes. The buyer will use the house as their own residence.

Because the buyer is an individual, the home is for qualifying residential use and the price is no more than ¥100 million, the NTA exception can apply and the buyer does not have to withhold under this rule.

Example 2: ¥28 million rental investment

The same individual buys the same ¥28 million house but plans to rent it to tenants.

The price is below ¥100 million, but the residential-use exception is not satisfied merely because the asset is a house. Under the NTA's general rule, withholding can apply.

At 10.21%, ¥28 million corresponds to ¥2,858,800 of withholding. The closing documents should be structured around that obligation rather than treating it as an afterthought.

Example 3: ¥120 million personal residence

An individual purchases a ¥120 million house from a non-resident seller and intends to live there.

The use condition is met, but the price condition is not. Because the transfer price exceeds ¥100 million, the individual-homebuyer exception does not apply on those facts.

When the withheld amount must be paid

For consideration paid to the non-resident in Japan, the NTA says the withheld income tax and special income tax for reconstruction is generally due by the 10th day of the month following the payment.

The NTA also addresses payments made outside Japan. If the payer has a residence, place of business or other qualifying presence in Japan, an overseas payment may still be treated as a domestic payment for withholding purposes. In that case, the NTA states that the payment deadline is generally the last day of the following month.

Cross-border closings are exactly where a buyer should confirm the payment route and filing mechanics with a Japanese tax professional before funds move.

The withholding is not the seller's final tax bill

The 10.21% amount is withholding from the transfer consideration. It is not a declaration that the seller's final Japanese capital-gains tax equals 10.21% of the sale price.

The seller's eventual Japanese tax liability is determined separately under the tax-return rules. That distinction matters commercially: the withholding is not a buyer discount and should not silently alter the agreed purchase price.

For broader non-resident owner filing issues after purchase, see Engawa's guide to Japanese property tax returns and withholding for non-residents.

Closing checklist before buying from an overseas seller

Before the settlement amount is fixed, ask the broker, judicial scrivener and tax adviser to confirm:

  1. The seller's Japanese tax-residency status. Nationality and current mailing address alone are not a safe substitute for a tax-residency determination.
  2. Whether the asset is covered. The NTA rule covers land, rights in land, buildings and related structures.
  3. Whether the individual-homebuyer exception actually fits. Confirm both qualifying residential use and the ¥100 million-or-less price condition.
  4. Who will calculate and remit the withholding. Put the figure and payment mechanics into the closing statement.
  5. The payment date and payment location. Those facts affect the remittance deadline described by the NTA.
  6. What evidence should be retained. Keep the contract, settlement statement, seller-status evidence and tax-payment documentation with the purchase file.

If there is uncertainty about the seller's status, solve it before sending the balance. Correcting a cross-border closing after the entire price has been paid is much harder than designing the settlement correctly from the outset.

How this differs from FEFTA reporting

This withholding rule and Japan's foreign-exchange reporting rules answer different questions.

The 10.21% withholding rule concerns payment to a non-resident seller and collection of Japanese income tax from that payment. The FEFTA acquisition report can apply because a non-resident buyer acquired Japanese real property. A single transaction can therefore raise one, both or neither obligation depending on the parties and facts.

If you are buying while non-resident, also read Engawa's 20-day FEFTA acquisition reporting guide and the broader guide to buying property in Japan as a foreigner.

Sources

Sources checked 18 August 2026. This article explains the NTA's general rule for buyer-side withholding and is not tax or legal advice. Tax residency, payment mechanics, treaty issues and transaction structure can change the result, so obtain transaction-specific Japanese professional advice before settlement.

Frequently asked questions

Do I have to withhold tax when buying property in Japan from a non-resident seller?

Generally yes. Japan's National Tax Agency says a person paying a non-resident or foreign corporation for Japanese land, rights in land, buildings or related structures must generally withhold income tax and reconstruction surtax at 10.21% of the payment.

What is the exemption for an individual buying a home from a non-resident seller?

An individual does not have to withhold when both conditions are met: the property is purchased for that individual or a relative to use as a residence, and the transfer price is ¥100 million or less. An investment, second-use arrangement outside that residence condition, or a price above ¥100 million does not fit that exception.

When must withheld tax on a Japan property purchase be paid?

For a payment made in Japan, the National Tax Agency states that the withheld tax is generally due by the 10th day of the month following payment. If payment is made outside Japan but is deemed domestic because the payer has a residence, office or other qualifying presence in Japan, the stated deadline is generally the end of the following month.

Is the 10.21% withholding the seller's final capital-gains tax?

No. Withholding is a collection mechanism applied to the payment, not a statement of the seller's final tax liability. The seller's Japanese tax position is settled separately under the applicable filing rules, so the purchase contract and closing statement should not treat the withheld amount as a negotiated price discount.

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