What taxes are required to be paid annually after owning a property? (e.g., Fixed Asset Tax, City Planning Tax)

Hello! That's a great question. Many people focus solely on the purchase price when buying property, but the annual costs after ownership are the long-term trickle you must calculate carefully. Based on my experience, I'll break it down for you in simple terms.

Owning property in Japan involves two main categories of annual costs: taxes paid to the government, and fees paid to the management association if you buy a condominium (マンション).

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Part 1: Taxes Paid to the Government (Annual)

These are unavoidable for all property owners, whether you own a detached house or a condo. Primarily, these are the two you mentioned:

1. Fixed Asset Tax (固定資産税)

• What is it? Simply put, it's a tax paid to the local government for owning "fixed assets" like land and buildings in Japan. Think of it as a "property tax" or "land tax." This is the largest ongoing ownership cost.

• How is it calculated? This tax isn't based on your purchase price. Instead, it uses a "Fixed Asset Tax Assessed Value" (固定資産税評価額). The government reassesses this value every three years, and it's usually significantly lower than the market price—typically around 60%-70% of market value.

  Calculation Formula: Assessed Value × 1.4% (Standard Rate)

• Are there reductions? Yes! The Japanese government offers significant tax breaks to encourage homeownership, especially for small residential plots. For example:

  • Residential Land Special Measure: For land portions under 200 sqm, the assessed value is reduced to 1/6 for tax calculation. For portions over 200 sqm, it's reduced to 1/3.
  • New Construction Reduction: For newly built houses, the tax on the building portion is halved for the first few years (generally 3 years, or 5 years for Long-Term Quality Housing).

2. City Planning Tax (都市計画税)

• What is it? This tax funds urban infrastructure. Think of it as a "municipal development tax." Your payment goes towards building roads, parks, sewage systems, and other public facilities.

• Does everyone pay it? Not necessarily. You only pay this tax if your property is located within a government-designated "Urbanization Promotion Area" (市街化区域). Essentially, these are densely populated, well-developed urban areas. Properties in rural areas might be exempt. However, if you buy in major cities like Tokyo or Osaka, you'll almost certainly be in such an area.

• How is it calculated? It uses the same "Assessed Value" as the base for calculation.

  Calculation Formula: Assessed Value × Maximum 0.3% (Rate varies by municipality)

• How are they paid? Typically, both taxes are combined on a single "Tax Payment Notice" (納税通知書). The city government mails this notice to your home around April-June each year. You can pay the full amount at once or split it into four installments (e.g., June, September, December, February of the following year).

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Part 2: Condominium-Specific Fees (Monthly)

If you buy a condominium (マンション), besides the taxes above, you'll have two fixed monthly payments to the building's management association (similar to a homeowners' association/property management in other countries).

1. Management Fee (管理費)

• What is it? This fee covers the daily operation and maintenance of common areas. Examples include:

  • Utilities for shared spaces (lobby, hallways, elevators)
  • Cleaning staff costs
  • Salaries for building managers (if applicable)
  • Regular inspection and maintenance of elevators, fire safety equipment

  Think of it as the building's "living expenses" to ensure a clean, safe, and comfortable environment.

2. Reserve Fund for Repairs (修繕積立金)

• What is it? This fund is crucial! It's essentially savings for the building's "retirement." Like anything, buildings age and require major repairs over time. For instance, every 10-15 years, work might include:

  • Repainting the exterior
  • Repairing roof waterproofing
  • Replacing aging pipes, elevators, or other major equipment

  These are large, expensive projects. The Reserve Fund pools money from all owners monthly into a shared account. When major repairs are needed, the funds come from here, avoiding the need for sudden, massive lump-sum payments from each owner.

• Note: This fee usually increases as the building ages because older buildings require more maintenance.

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Summary

Final Tip:

Before deciding on a property, be sure to ask the real estate agent for these key figures:

1. What was the total Fixed Asset Tax and City Planning Tax for the previous year? (Use as a reference)
2. What are the monthly Management Fee and Reserve Fund for Repairs for this condo?
3. What is the current balance of the condo's Reserve Fund? Are there planned fee increases?

Adding these ownership costs to your mortgage payments will give you an accurate picture of affordability. Hope this information helps!