Fixed Asset Tax and City Planning Tax: The Annual Taxes on Owning Property in Japan

The short answer

Buying property in Japan brings two local taxes that you pay every year on top of management fees and repair reserves: fixed asset tax (koteishisan-zei) and city planning tax (toshi-keikaku-zei). Both are calculated from an "assessed value" set by the municipality. The rates are modest, but the bill arrives every year for as long as you own the property, and there are specific reliefs for residential land and newly built homes. Using Osaka City as the example, here is how the two taxes work.

Who pays: the owner on January 1

Fixed asset tax is owed by whoever is registered as the owner of the land or building on the assessment date, January 1 of each year ^[1]. City planning tax applies to people who, on the same date, own land or buildings inside the urbanization promotion area of Osaka City, which covers practically all housing in the city ^[1].

This has a practical consequence. If you buy partway through the year, that year's tax bill still goes to the owner as of January 1, which is the seller ^[1]. In resale transactions it is therefore customary to prorate the year's tax by day at settlement and handover, with the buyer paying the seller the share that corresponds to the buyer's period of ownership. The start date for the proration is set in the sale contract, so it is worth checking that clause before signing.

As for payment, Osaka City mails the tax notice in early April each year. The tax is normally paid in four installments, in April, July, December and the following February, or the full year can be paid at once ^[1]. Owners who live overseas can easily miss a deadline when the notice never reaches them, so it is common to appoint a tax agent in Japan to receive the notice and make the payments.

How it is calculated: assessed value × relief × rate

The basic formula is "tax base × rate". In Osaka City the fixed asset tax rate is 1.4% and the city planning tax rate is 0.3% ^[1]. The tax base starts from the assessed value set by the municipality. This is not your purchase price, and it is usually well below the market price. The assessed values of land and buildings are reviewed together once every 3 years, in a so-called base year ^[1].

Each year from April 1 until the first payment deadline, owners can inspect, free of charge at the city tax office for their ward, the assessed values of other land and buildings in the same ward, so they can judge whether their own assessment is reasonable ^[1].

Residential land relief: a large cut on the land portion

Land with a home on it qualifies for the residential land special provision, under which the tax base is only a fraction of the assessed value ^[2]:

Category	Fixed asset tax	City planning tax
Small residential land (up to 200㎡ per dwelling)	1/6 of assessed value	1/3 of assessed value
General residential land (portion above 200㎡ per dwelling)	1/3 of assessed value	2/3 of assessed value

The relief is applied per dwelling unit ^[2]. In a condominium the land is co-owned by all units according to their shares, and the land area attributed to each unit is normally far below 200㎡, so the land portion of a condo usually qualifies in full for the small residential land relief ^[2]. Your tax notice will show how it has actually been applied.

New-build reduction: the building portion is halved at first

If a newly built home meets the requirements, the fixed asset tax on the building is reduced: the tax on the residential portion up to 120㎡ is cut in half. City planning tax is not reduced ^[3]. The reduction lasts 5 years from the first tax year for fire-resistant or quasi-fire-resistant homes of 3 or more stories, which includes most condominiums, and 3 years for other homes ^[3].

The floor area requirement depends on when the home was built. For homes completed on or before March 31, 2026, the residential portion must be at least 50㎡ and no more than 280㎡ (40㎡ or more for rental housing other than detached houses). For homes completed on or after April 1, 2026, the range is 40㎡ to 240㎡ ^[3]. In a condo, common areas such as corridors, stairs and elevator halls are divided among the units in proportion to their floor area before the test is applied ^[3].

Keep in mind that once the reduction period ends, the tax on the building returns to its normal level. When buying a new or nearly new property, check how many years of the reduction remain, and do not mistake the halved amount for your long-term holding cost.

A worked example

Suppose a 75㎡ condo in Osaka City has an assessed value of 5 million yen for its share of the land and 10 million yen for the building (illustrative figures only; the real amounts appear on the tax notice). Applying the rates and reliefs above ^[1][2]:

• Land, fixed asset tax: 5 million yen × 1/6 × 1.4% ≈ 11,667 yen ^[2]
• Land, city planning tax: 5 million yen × 1/3 × 0.3% = 5,000 yen ^[2]
• Building, fixed asset tax: 10 million yen × 1.4% = 140,000 yen ^[1]
• Building, city planning tax: 10 million yen × 0.3% = 30,000 yen ^[1]

The total comes to about 187,000 yen a year, or roughly 15,600 yen a month ^[1]. If the condo is still within the new-build reduction period, the building's fixed asset tax is halved to 70,000 yen and the total falls to about 117,000 yen ^[3].

Two things stand out. First, most of a condo's tax comes from the building; thanks to the relief, the land is the smaller part. Second, the building's assessed value declines as it ages, so for the same unit the building portion of the tax tends to fall as the property gets older. The actual tax base for land can also be lower than this simple calculation because of adjustment measures.

What this means for buyers

1. Include the taxes in your holding costs. When comparing properties, add the annual fixed asset tax and city planning tax to the price, management fee and repair reserve. The most reliable approach is to ask the seller, through the agent, for the latest tax notice or an assessment certificate.
2. Remember the proration at settlement. The amount you pay on handover day usually includes your prorated share of the year's tax, so budget for it.
3. For new builds, check the remaining reduction years. The tax rises noticeably in the year the reduction ends, which matters whether you live in the property or rent it out.
4. If you live overseas, arrange how you will pay. Appoint a tax agent or set up a payment method in advance so that late payments and penalties do not build up.

Summary

Fixed asset tax and city planning tax are a fixed cost of owning property in Japan. They are paid by the owner as of January 1, calculated by multiplying the assessed value by the tax rate, and come with reliefs for residential land and newly built homes ^[1]. If you would like an estimate of the annual tax on a property you are considering, please contact us. We can help confirm the seller's tax documents and work out the full cost of ownership with you.