Selling Japan Property as a Non-Resident: The 10.21% Buyer Withholding and Refund

Status as of June 2026: All rates, statutory references, and treaty articles below reflect the law as of this date. The 10.21% buyer-withholding rate (Income Tax Act §212), the ¥100M personal-use exception (Enforcement Order §281-3), and the long-term/short-term capital gains rates (Special Taxation Measures Act §31/§32) are stable. Currency reference: JPY 1 ≈ USD 0.0064 ≈ HKD 0.050 as of April 2026 (illustrative; rates fluctuate). Last verified: 2026-06-05.

The acquisition-to-holding sequence of a Japan property investment ends, eventually, in a sale — and for a Hong Kong owner the sale stage has a feature that surprises almost everyone the first time: the buyer withholds tax from the seller at closing. A HK client expecting to receive the full contracted price is paid net of a 10.21% deduction they did not budget for, on a base — the gross price — that bears no relationship to whether they actually made money.

This article is the exit-stage companion to the rest of the guide. For the income-tax side of holding the property, see Rental Income Taxation for Non-Resident HK Owners; for the deeper mechanics of the 5-year holding rule and its January 1 trap, see Japan’s 5-Year Rule: Short-Term vs. Long-Term Capital Gains. Here the focus is the part that catches HK sellers specifically: the buyer’s source-withholding obligation, and how the seller gets the over-withheld amount back.

At a Glance — Two Things Happen at a Non-Resident Sale

The single most important point for an HK advisor to convey early: the 10.21% is withheld on the entire price, not on the profit. A client selling for ¥800M has ¥81.68M deducted at closing, whether their actual gain is ¥150M or zero. The deduction is a prepayment, and the difference between it and the real tax is recovered — but only by filing a return, and only through a Japan-resident Tax Agent. Sellers who do not plan for this experience it as a liquidity shock at closing followed by a refund many months later.

Why 10.21%? The Withholding Mechanism

A non-resident’s gain from transferring real estate located in Japan is Japan-source income under Income Tax Act (所得税法) §161(1)(v) — income from the transfer of domestic real property. Because the seller is outside Japan and beyond easy reach of the tax authority after the sale closes, Japan secures the tax at source: under §212(1), a person who pays a non-resident for the transfer of Japanese real estate must withhold and remit income tax at the time of payment.

The rate is set by §213 at 10%, increased by the special reconstruction surtax (復興特別所得税) of 2.1% on the national tax, producing the familiar 10.21% (10% × 1.021). The buyer remits the withheld amount to the National Tax Agency by the 10th day of the month following payment and issues the seller a withholding record (支払調書 / 源泉徴収票 equivalent) documenting the deduction — the seller needs this to claim the credit on the eventual return.

In practice, the judicial scrivener (司法書士) and the buyer’s side handle the mechanical deduction and remittance at closing; the HK seller’s role is to ensure the deduction is correctly documented so it can be reclaimed. The deduction shows up as a line on the settlement statement, reducing the funds wired to the seller.

The ¥100M Personal-Use Exception (and Why It Rarely Applies)

The one statutory escape from the 10.21% withholding is narrow. Under Income Tax Act Enforcement Order (所得税法施行令) §281-3, withholding is not required when both of these are true:

1. The sale price is ¥100,000,000 or less, and
2. The buyer is an individual who acquires the property for use as the residence of the buyer or a relative.

Both conditions must hold simultaneously. The logic is consumer-protection-flavoured: a private individual buying a modest home for their own family should not be conscripted as a tax withholding agent. But the conditions exclude most HK-advised transactions:

• Price above ¥100M — typical for the central Tokyo property HK clients transact — fails condition 1 regardless of buyer type.
• A corporate buyer (developer, fund, GK/TMK vehicle) fails condition 2 even under ¥100M.
• An individual buying for investment or rental — not as their own residence — also fails condition 2.

For advisory purposes, the safe default is: assume the 10.21% applies. The exception is worth checking only for sub-¥100M sales to an owner-occupier individual — an uncommon profile in the HK-investor book. Where it does apply, the seller still owes capital gains tax; the exception removes only the closing-stage withholding, not the underlying liability resolved at filing.

Long-Term vs Short-Term — The 5-Year Rule

The capital gains rate depends on how long the property was held, measured by a rule that traps the unwary. Under the Special Taxation Measures Act, the holding period is tested as of January 1 of the year of sale, not as of the sale date itself:

• Long-term (長期譲渡所得) — owned for more than 5 years as of January 1 of the sale year — Special Taxation Measures Act (租税特別措置法) §31.
• Short-term (短期譲渡所得) — owned for 5 years or less as of that January 1 — §32.

Because the clock is read on January 1, a property must generally be held past the sixth January 1 after acquisition to qualify as long-term. A property acquired in March 2021 and sold in February 2026 is still short-term on the 2026 sale — at January 1, 2026 it had been held only 4 years and 10 months. Selling one year later (2027) flips it to long-term and roughly halves the rate. For a complete treatment of this calendar trap and its interaction with the 4-year depreciation strategy, see Japan’s 5-Year Rule.

For HK sellers the practical instruction is simple: before listing, confirm which side of the January 1 line the sale falls on. The difference is large enough that a deal timed a few weeks early can cost the client tens of millions of yen.

Tax Rates — and the Non-Resident Inhabitant-Tax Nuance

The headline individual rates are:

There is a nuance that matters specifically for non-residents and is easy to get wrong. The inhabitant-tax portion (5% long / 9% short) is levied only on persons who have a domicile (住所) in Japan as of January 1 of the year following the sale. A Hong Kong seller who is a non-resident with no Japanese domicile on that date is generally not subject to inhabitant tax on the gain — leaving the national income tax portion alone:

• Long-term, non-resident: 15.315%
• Short-term, non-resident: 30.63%

This is a genuine, favourable difference from the resident case, and it is why the 10.21% prepayment is so often heavily over-withheld for a long-term non-resident sale (10.21% withheld on the full price vs. 15.315% due on the much smaller gain frequently nets to a large refund). It is not a blanket rule, however: domicile is a facts-and-circumstances question, and a seller who was a Japan resident during part of the relevant period, or who reacquires a domicile, can fall within inhabitant tax. Confirm domicile status with a Japanese tax accountant before quoting a client the lower rate — present 15.315% / 30.63% as the likely non-resident outcome, not a guarantee.

Allowable Cost Basis — What Reduces the Gain

The taxable gain is the sale price minus the acquisition cost (取得費) and the transfer expenses (譲渡費用). Getting these right is where most of the seller’s recoverable money lives.

Acquisition cost (取得費) includes:

• The original purchase price of land and building.
• Acquisition-stage taxes and costs capitalised into basis — registration tax, Real Estate Acquisition Tax, judicial scrivener fees, and the purchase-side brokerage (see Acquisition Taxes Explained for these items).
• Capital improvements made during ownership.

Critically, for a property that was rented out, the building’s accumulated depreciation is subtracted from acquisition cost under Income Tax Act §38(2), which requires a depreciable asset’s acquisition cost to be reduced by the accumulated depreciation-equivalent amount when computing the gain (see NTA Tax Answer No.3261, Calculating a Building’s Acquisition Cost). The depreciation the owner deducted against rental income over the holding period reduces the building’s adjusted basis, increasing the taxable gain on sale. An HK owner who enjoyed large depreciation deductions while holding (the rental-income article covers why these are typically the biggest deduction) effectively defers part of that benefit into a higher gain at exit — a point worth flagging when modelling total after-tax return, not just the holding-period yield.

If acquisition records are missing, the law allows a deemed acquisition cost of 5% of the sale price — almost always far worse than actual records for an HK buyer who paid genuine money, so original closing documents should be preserved for the entire holding period.

Transfer expenses (譲渡費用) include the sale-side brokerage commission (typically ~3.3% incl. consumption tax), the seller’s portion of any contract stamp duty, and demolition or eviction costs incurred to effect the sale.

Refund Process — Recovering the Over-Withheld 10.21%

Because the 10.21% is withheld on gross price while the real tax is computed on the net gain at 15.315% / 30.63% (non-resident, national portion), the prepayment usually exceeds the liability. Recovery is by filing:

1. Appoint a Tax Agent (納税管理人) under National Tax Act (国税通則法) §117, if not already appointed during ownership. The Tax Agent is a Japan-resident representative who files on the non-resident’s behalf and receives the refund (a non-resident cannot receive an NTA refund without a domestic agent and account).
2. File the final income tax return (確定申告) for the year of sale, reporting the gain under the separate self-assessment method (申告分離課税) on the dedicated capital gains schedule. The buyer-withheld 10.21% is entered as prepaid tax and credited against the computed liability.
3. Receive the refund of the difference. The filing window is 16 February to 15 March of the year following the sale.

Which tax office handles the filing? The non-resident’s place of tax payment (納税地) is set by Income Tax Act §15 and Enforcement Order §54. If the seller had been filing Japanese rental income before the sale, the office they used — typically the one covering the property’s location — carries over (§54(1)). Where no such place is determinable, the default for non-residents is the Kojimachi Tax Office (麹町税務署) in Chiyoda-ku, Tokyo (§54(3)) — the office that in practice handles non-resident and international filings. HK sellers who never held a Japanese filing address generally end up at Kojimachi; the Tax Agent should confirm the correct office before submission, because filing at the wrong office delays the refund.

Some Hong Kong and U.S. advisors still refer to this filing as “Form 17,” a legacy designation from the pre-2022 Japanese form numbering. The current filing uses the standard 確定申告書 plus the separated-gains schedule; the substance — credit the withheld amount, compute tax on the net gain, refund the excess — is unchanged.

The cash-flow shape for the client is therefore: 10.21% deducted at closing → return filed the following Feb–Mar → refund some months after. The gap between losing the cash at closing and recovering it can exceed a year depending on sale timing, which is the planning point: a client who needs the full proceeds immediately after closing should be told the recoverable portion is locked up until the filing cycle completes.

Worked Example — HK Resident Selling a ¥800M Tokyo Apartment Held 7 Years

Briefing-grade illustration, not a deliverable. Actual figures depend on original cost records, accumulated depreciation, the land/building split, and confirmed domicile status. The numbers below show typical orders of magnitude an HK advisor can use to convey structure; a Japanese tax accountant produces the precise return.

Scenario: HK-resident individual, no Japanese domicile, sells a Minato-ku apartment in 2026 for ¥800M. Acquired March 2019 for ¥600M (land ¥360M + building ¥240M), with ¥45M of capitalised acquisition costs. Rented out for the full holding period; accumulated building depreciation ≈ ¥37M. Sale-side brokerage ≈ ¥26.4M.

Holding period: acquired March 2019; at January 1, 2026 the property had been held ~6 years 10 months > 5 years → long-term (§31).

The structure to convey: the client felt an ¥81.68M hit at closing, but the true tax was ~¥25.4M, and ~¥56.3M is recovered by filing the following Feb–Mar through the Tax Agent. Had the same property been short-term (sold a few years earlier), the rate would have been 30.63% — roughly ¥50.7M of tax on the same gain, double the long-term figure. The two levers an advisor controls at the exit are therefore timing across the January 1 line and preserving acquisition-cost records so the gain is computed on real basis rather than the punitive 5% deemed cost.

Japan-Hong Kong Treaty Considerations

Under Article 13 of the Japan-Hong Kong Tax Treaty, gains derived from the alienation of immovable property situated in a Contracting State may be taxed in that State. Japanese real estate gains are therefore taxable in Japan with no treaty rate reduction — the treaty allocates the primary taxing right to the situs country, which for Tokyo property is Japan.

In practice this rarely produces double taxation: Hong Kong does not levy a general capital gains tax on individuals, and gains of HK corporations from foreign immovable property fall under separate Foreign-Sourced Income Exemption (FSIE) analysis rather than a competing HK capital gains charge (the corporate-holding structures and HK FSIE substance angle is covered in How Hong Kong Companies Hold Japan Real Estate). The treaty’s effect at the sale stage is thus allocative, not relieving — it confirms Japan’s right to tax and removes any expectation that HK residency lightens the Japanese bill. For the broader conceptual frame of how the two systems interact across acquisition, holding, and sale, see Hong Kong vs. Japan Tax Comparison.

Key References

Primary statutes:

• Income Tax Act (所得税法) — §161(1)(v) (non-resident’s domestic-source real estate transfer income); §212(1) (withholding obligation on payment to non-resident); §213 (10% withholding rate)
• Income Tax Act Enforcement Order (所得税法施行令) — §281-3 (¥100M + buyer’s personal-use exception to withholding)
• Special Taxation Measures Act (租税特別措置法) — §31 (long-term capital gains, 20.315%); §32 (short-term capital gains, 39.63%)
• Income Tax Act §33 & §38 — §33 defines capital gains (譲渡所得); §38(2) requires a depreciable asset’s acquisition cost to be reduced by accumulated depreciation when computing the gain
• National Tax Act (国税通則法) — §117 (Tax Agent / Nozei Kanrinin appointment requirement for non-residents)
• Income Tax Act §15 & Enforcement Order §54 — non-resident’s place of tax payment (納税地); §54(3) defaults to Kojimachi Tax Office (麹町税務署), the non-resident/international filing office
• Special reconstruction surtax (復興特別所得税) — 2.1% on national income tax, applied within the 10.21% / 15.315% / 30.63% figures above

Government information sources:

• NTA Tax Answer No.1440 — Capital gains on land and buildings (譲渡所得) (Japanese)
• NTA Tax Answer No.2879 — Withholding on payments to non-residents for real estate transfer (Japanese)
• NTA Tax Answer No.1932 — Selling real estate while residing abroad (納税地) (Japanese; non-resident place-of-filing rules)
• NTA Tax Answer No.3261 — Calculating a building’s acquisition cost (建物の取得費) (Japanese; depreciation reduces basis)
• NTA — Tax Agent (納税管理人) guidance (Japanese)

Treaty:

• Japan-Hong Kong Tax Treaty (2010) — Article 13 allocates taxing rights on immovable-property gains to the situs state (Japan). No rate reduction applies to the Japanese capital gains charge.

Related articles in this series:

• Rental Income Taxation for Non-Resident HK Owners — The holding-stage companion; depreciation taken here reduces basis at sale
• Japan’s 5-Year Rule: Short-Term vs. Long-Term Capital Gains — Deep dive on the January 1 holding-period trap
• Stamp Duty, Registration Tax, and Real Estate Acquisition Tax — Acquisition costs that capitalise into basis
• A Foreign Investor’s Guide to Buying Property in Japan — Whole-cycle overview
• HK Professional Advisor Primer: 10-Minute Reference — Hub article across the full guide series
• How Hong Kong Companies Hold Japan Real Estate — Corporate-holding structures and HK FSIE substance for a corporate seller
• Japan Inheritance Tax for Foreign Heirs (planned) — The hold-don’t-sell alternative

For Professional Advisors

If you are a Hong Kong-based lawyer, banker, tax counsel, or family office advisor structuring a Japan property exit, this article is written to be shareable as client briefing material. The numerical assumptions in the worked example (cost basis, accumulated depreciation, domicile status, land/building split) require verification against the specific transaction — a Japanese tax accountant should confirm the domicile-dependent inhabitant-tax treatment and the precise gain computation. We’re available for case-specific discussions on regular Hong Kong visits; feel free to share this article with clients or contact us via /contact/.

7vip.tokyo is operated by Acuze G.K., a licensed real estate broker (Tokyo Governor License (1) No. 112235). Founder Takaharu Saito is a member of the American Chamber of Commerce in Japan (ACCJ), with established networks across English-speaking high-net-worth and professional-services communities, and has been engaged with Hong Kong’s Japan real estate investment community since 2018 through bi-monthly visits and partnership with a Japanese-led HK-based wealth management firm; see our Company Profile for background.

This article is for general informational purposes only and does not constitute legal, tax, or investment advice. Tax rates, withholding rules, and procedural requirements change, and the inhabitant-tax treatment of a non-resident depends on individual domicile facts; the specifics described above reflect the law as of June 2026 and should be verified for transactions advised after that date. Consult a qualified Japanese tax accountant (税理士) and licensed real estate broker for guidance on your specific situation.