Selling Property in Japan: Capital Gains, Timelines, Agent Commissions

Selling property in Japan involves a unique set of processes and costs that sellers—especially foreign owners—need to understand. From capital gains taxes that depend on how long you've owned the property to the typical timeline for finding a buyer, and the standard real estate agent commissions regulated by law, it's essential to plan ahead. This guide provides a step-by-step overview of the selling process in Japan, explains the tax implications (and how to minimize them), outlines how long a sale might take, and details the fees and strategies to maximize your net profit.

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Understanding the Property Sale Process in Japan

Selling real estate in Japan generally follows a structured process. Below is a step-by-step breakdown from listing your property to closing the deal, along with the key documents you need to prepare.

Step 1: Choosing an Agent and Listing the Property

Most sellers start by selecting a licensed real estate agent (broker) to list their property. You will sign a brokerage agreement (媒介契約) with terms on how the agent will advertise and find buyers.

Three types of agreements:

• General
• Exclusive
• Exclusive-right

Many sellers opt for an exclusive listing to have the agent focus on their sale. Once the agreement is in place, the agent will determine a listing price with you and begin marketing the property through real estate websites, flyers, and the MLS system (REINS) accessible to other brokers.

Step 2: Buyer Viewings and Negotiation

After listing, interested buyers will schedule viewings (内覧). It's important to keep the property presentable for showings. When a buyer decides to make an offer, price negotiations can take place through the agents. You may receive a written purchase offer or letter of intent from the buyer, and you can counteroffer if needed. This stage can involve back-and-forth on price, closing date, and any contingencies (for example, the buyer securing financing).

Step 3: Signing the Sales Contract (売買契約締結)

Once both parties agree on terms, a formal sales contract is prepared. The contract signing is usually held in person with a government-licensed notary or judicial scrivener present to explain important details (重要事項説明) to the buyer as required by law.

At contract signing:

• Buyer typically pays a deposit (手付金), often around 5-10% of the purchase price
• Both parties affix their seal (inkan) or signature to the contract
• Contract specifies the closing date for final payment and transfer of ownership
• A revenue stamp (印紙税) must be attached to the contract as stamp duty (e.g., ¥30,000 for a ¥50 million contract)

Step 4: Settlement and Property Transfer (決済・引渡し)

The final stage is the settlement (closing), typically scheduled about 1 to 2 months after the contract signing. During this period, the buyer arranges financing (if needed) and both sides prepare for handover.

On the settlement day:

• Remaining balance of the purchase price is paid to the seller
• Official transfer of the property's title is completed at a legal office (often with a judicial scrivener handling the registration)
• Seller hands over the property keys and related documents to the buyer
• After settlement, the sale is complete and the buyer is the new owner

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Required Documents for Sellers

Japanese Citizens Typically Provide:

Document Type	Purpose
Driver's license or MyNumber card	Identity verification at closing
Personal seal and Seal Registration Certificate (印鑑証明書)	Verifies the registered hanko seal used on official documents
Residence Certificate (住民票)	Proves address and residency
Property Title Documents	Original deed or latest 登記識別情報 (registration identification)
Property Tax Bill or Certificate (固定資産税評価証明書)	Used to adjust property tax and verify property details

Foreign Sellers Need Similar Documents, With Differences:

If you are a resident of Japan with a residence card:

• Can obtain a 住民票 and 印鑑証明書 just like Japanese sellers
• If you have registered a personal seal, that will be used; otherwise, a signature can be used on contracts

If you are not eligible to obtain a Japanese residence record or seal registration:

• Sworn affidavit of address notarized by the authorities in your country (or at your embassy) serves as substitute for residence certificate
• Signature certificate issued by your country's embassy replaces the seal registration certificate
• Power of attorney: If you cannot attend the closing in person, appoint someone (often the judicial scrivener or a representative) as your proxy with a notarized power of attorney

Important: All transaction documents and contracts will be in Japanese. Foreign sellers who are not fluent should consider hiring a bilingual agent or translator to ensure they understand the details.

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Capital Gains Tax on Real Estate Sales

One of the largest costs when selling property in Japan can be taxes on any capital gain (譲渡所得税). The capital gains tax rate in Japan depends heavily on how long you have owned the property.

Short-Term vs. Long-Term Ownership Tax Rates

Japanese tax law distinguishes between short-term and long-term capital gains on real estate using a 5-year rule. The ownership period is measured as of January 1 of the sale year.

Ownership Period	Classification	Tax Rate Breakdown	Total Tax Rate
5 years or less	Short-Term	30% national + 0.63% surtax + 9% local	≈39.63%
Over 5 years	Long-Term	15% national + 0.315% surtax + 5% local	≈20.315%

Tax Impact Example:

Property purchased for ¥50 million, sold for ¥80 million (¥30 million gain):

Tax Classification	Tax Amount
Short-term (≤5 years)	≈¥11.9 million
Long-term (>5 years)	≈¥6.1 million
Savings by waiting	≈¥5.8 million

Critical Timing Note: Because the 5-year holding period is judged by the date of January 1, you actually need to own slightly longer than 5 calendar years to get long-term treatment. A sale on December 31 vs. January 1 of the next year can make the difference.

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Special Deductions and Exemptions

¥30 Million Primary Residence Deduction (3,000万円特別控除)

Japan's most notable tax relief measure: exclude up to ¥30,000,000 of capital gain from taxation when selling your primary residence (自宅).

Qualification Requirements:

• ✓ Property must have been your main home (not a rental or second home)
• ✓ Sale must not be to a close relative
• ✓ If already moved out, sale should take place within 3 years
• ✓ Cannot use this deduction more than once in a two-year period

Example: If your gain is ¥30 million or less, you would owe no capital gains tax after applying this deduction.

10+ Year Ownership Special Rate

If you owned and lived in your primary residence for over 10 years, you receive an even better rate:

Gain Amount	Tax Rate
Up to ¥60 million	14% (10% national + 4% local + surtax)
Beyond ¥60 million	Normal long-term rate (≈20.315%)

Bonus: This 10-year+ benefit can be used in addition to the ¥30M deduction, providing significant savings for long-term homeowners.

Capital Gains Rollover (買換え特例)

If you purchase a new home around the time of selling your old one, you can defer paying capital gains tax until you sell the new property.

Conditions:

• Sale price is under ¥100M
• New home is equal or greater in value
• Meeting timing requirements

⚠️ Note: This deferral cannot be combined with the ¥30M special deduction—you must choose one or the other.

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Tax Withholding for Foreign (Non-Resident) Sellers

If you are a non-resident for Japanese tax purposes, be aware of Japan's tax withholding system.

Withholding Requirements:

Scenario	Withholding Rate	Who Withholds
Standard requirement	10.21% of gross sale price	Buyer
Exemption: Individual buyer for personal residence under ¥100M	No withholding	N/A
Company/business buyer or sale over ¥100M	10.21% required	Buyer

Example:

• Sell house to Japanese family for ¥80M → Likely no withholding
• Sell ¥500M building to company → Company must withhold ¥51.05M

Important Points:

✓ The 10.21% withheld is not an extra tax; it's a prepayment
✓ File a Japanese tax return the following year to report actual gain and tax owed
✓ If withholding exceeds actual tax, you receive a refund
✓ Tax treaties may allow you to claim foreign tax credit in your home country
✓ Consult a tax professional familiar with cross-border transactions

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How Long Does It Take to Sell Property in Japan?

Average Timeline: 3–6 Months

From listing to closing, most home sales in Japan take 3 to 6 months. Industry data shows about 76% of homes sell within 6 months, with roughly 20% selling within the first 2–3 months.

Timeline Variations by Property Type:

Property Type	Typical Timeline	Notes
Urban Condominiums (Mansions)	≈3 months	More standardized, higher demand, easier to compare
Detached Houses	≈6 months	More unique features, particular buyer set
Central Tokyo/Osaka	Faster (weeks to 2 months)	High buyer demand
Suburban/Rural Areas	Longer (6+ months to 1+ year)	Lower demand, limited transportation

Factors Affecting Timeline:

Market Conditions:

• Hot market with rising prices = faster sales
• Slow market = longer wait times
• Seasonal cycles (spring is busy season for moving in Japan)

Property Condition:

• Well-maintained, clean, nicely presented = faster sale
• Good condition attracts buyers more quickly

Pricing Strategy:

• Fair/competitive price = quicker sale
• Overpriced = extended time on market
• If property hasn't sold after 3 months, reassess price or strategy

Pro Tip: Plan for 3–6 months and build that into your moving or financial plans. Avoid panic selling—drastically cutting the price too quickly—unless absolutely necessary, as underpricing is one of the biggest causes of lost profit.

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Real Estate Agent Commissions and Costs

Hiring a real estate agent to handle your property sale is standard in Japan. Their compensation comes in the form of a brokerage commission (仲介手数料), paid only upon successful sale.

Standard Commission Rate Formula

For properties over ¥4 million (most properties):

Commission = (Sale Price × 3% + ¥60,000) + 10% consumption tax

How the Formula Works:

Price Range	Commission Rate
First ¥2 million	5%
¥2M to ¥4M	4%
Above ¥4M	3%

The ¥60,000 in the simplified formula represents the accumulated 5% and 4% portions on the first ¥4 million.

Commission Calculation Examples:

Sale Price	Base Commission	With 10% Tax	Total Fee
¥25,000,000	¥810,000	+ ¥81,000	¥891,000
¥50,000,000	¥1,560,000	+ ¥156,000	¥1,716,000
¥100,000,000	¥3,060,000	+ ¥306,000	¥3,366,000

Detailed breakdown for ¥25M example:

• 5% of first ¥2M = ¥100,000
• 4% of next ¥2M = ¥80,000
• 3% of remaining ¥21M = ¥630,000
• Subtotal: ¥810,000
• With 10% tax: ¥891,000

When Commission is Paid:

• Typically at time of settlement (closing)
• Sometimes split: half at contract signing, half at closing
• Paid via bank transfer or deduction from sale proceeds

Are Commissions Negotiable?

Yes! The legal limit is just a maximum—anything below is allowed.

When negotiation is more likely:

• ✓ High-value properties (large commission amounts)
• ✓ Multiple listings with same agent
• ✓ Competitive markets with discount brokerages
• ✓ Confident agents with easy-to-sell properties

Example: On a ¥100M property, 3% commission = ¥3M+. Agent might agree to 2-2.5% while still earning more than 3% on a cheaper property.

⚠️ Caution: Asking for too large a discount might affect agent's motivation and prioritization of your listing.

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Additional Costs to Expect When Selling

Cost Breakdown:

Cost Item	Amount	When Paid	Notes
Contract Stamp Duty	¥30,000 (for ¥50M contract)	Contract signing	Both parties pay for their copy
Mortgage Cancellation Fee	¥1,000 registration tax	Closing	If you have existing loan
Judicial Scrivener Fee	¥10,000–¥20,000	Closing	For mortgage release paperwork
Professional Cleaning	≈¥50,000+	Before listing	Kitchen, bath, toilets, etc.
Minor Repairs	Varies	Before listing	Fix leaks, patch walls, re-grout
Land Survey	Tens of thousands of yen	If needed	For boundary confirmation
Demolition	≈¥4–5M (100m² house)	If applicable	For old structures
Capital Gains Tax	See tax section	Following tax season	Largest cost to plan for

Deductible Expenses:

Remember that selling expenses can be deducted from your capital gain:

• Agent commission
• Legal fees
• Repair costs for sale
• Advertisement costs

Formula: Taxable gain = Sale price – Purchase cost – Improvement costs – Selling costs

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Maximizing Profit and Minimizing Taxes

1. Time Your Sale for Favorable Tax Treatment

Strategic Timing Considerations:

✓ Wait for long-term status (5+ years) to nearly halve your tax rate
✓ Close after January 1 if you purchased 5 years ago to ensure long-term qualification
✓ Use ¥30M deduction by meeting primary residence requirements
✓ Market timing: List in spring (February–April) when families are moving

2. Improve Property Appeal

Cost-Effective Enhancements:

Action	Impact	Cost Level
Fix obvious defects	Prevents buyer turn-off	Low to medium
Deep professional cleaning	Makes old home feel fresh	≈¥50,000+
Declutter and depersonalize	Helps buyers imagine themselves	Minimal
Simple staging	Makes rooms feel spacious	Low to medium
Bright lighting	Improves first impression	Minimal
Documentation ready	Speeds up due diligence	Free

Key Point: First impressions matter tremendously. These relatively low-cost steps can potentially raise perceived value and shorten selling time.

3. Pricing Strategy

Smart Pricing Approaches:

• ✓ Work with agent to set realistic asking price
• Review recent comparable sales
• Consider pricing slightly below similar listings to create interest
• Avoid overpricing (leads to extended market time and eventual cuts)
• Know your bottom line before negotiations
• Factor in holding costs (mortgage, taxes, maintenance) when deciding on offers

5. Engage Professional Help

When to Hire Professionals:

Professional	When Needed	Value Provided
Tax Accountant (税理士)	High-value sales, complex situations	Calculate gains, advise on deductions
Lawyer	Legal complications (inheritance, co-ownership)	Ensure compliance, handle disputes
Bilingual Agent	Foreign sellers not fluent in Japanese	Navigate paperwork, translate documents
Proxy/Representative	Overseas sellers	Handle closing paperwork in your absence

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Key Takeaways for Foreign Sellers

Quick Reference Summary:

Topic	Key Point	Action Item
Capital Gains Tax	39% if ≤5 years, 20% if >5 years	Time sale for long-term rate
Primary Residence Deduction	¥30M gain exclusion available	Verify qualification requirements
Selling Timeline	3–6 months average	Plan accordingly, don't panic sell
Agent Commission	≈3% + ¥60k + tax (negotiable)	Clarify in brokerage agreement
Non-Resident Withholding	10.21% withheld (exemptions apply)	Consult tax advisor, plan for cash flow
Documentation	All contracts in Japanese	Secure bilingual support if needed
Additional Costs	Stamps, cleaning, repairs, scrivener	Budget for these expenses

Final Checklist for Success:

Understand your tax situation before listing
Prepare all required documents early
Set realistic timeline expectations (3–6 months)
Budget for all costs (commission, taxes, repairs)
Improve property presentation before listing
Work with qualified professionals (agent, tax advisor, scrivener)
Use all available tax deductions and exemptions
Consider timing for optimal tax treatment
Price competitively based on market analysis
Stay patient and avoid panic selling

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Conclusion

Selling a property in Japan involves multiple moving parts—legal, financial, and procedural. But with careful planning and the right support team, foreign sellers can navigate the process successfully. By understanding the taxes, being patient with the timeline, managing costs like agent commissions wisely, and leveraging the available deductions, you'll be well on your way to a smooth sale and maximum return on your investment in Japanese real estate.

The key to success is preparation, strategic timing, and professional guidance. Take advantage of market conditions, use every tax break you qualify for, and present your property in the best possible light. These steps can significantly increase the money you keep in your pocket when all is done.