Q2 Are there differences if a property is being used as investment as opposed to for self-use?
There is not much difference according to law. However, if the intent of usage is for investment, then it is compulsory to file tax on an annual basis. We provide assistance with regards to tax filing, so we will take care of this for you.
Q3 Japan’s so-called “One Room Mansions” usually fall between 20 to 25 square meters. Relatively speaking, they are much smaller than Hong Kong’s counterparts. Why is there such a difference?
This discrepancy is explained by the difference in the understanding of ‘usable area’ by the two countries. In Hong Kong, ‘usable area’ includes both the property’s interior and the aggregate area of communal space (ie: balcony, corridor, etc.). In Japan, ‘usable area’ only includes the property’s interior.
Q4 What exactly are administration and maintenance fees?
Administration fee is for the management and maintenance of public utilities within the building. The fees included within the administration fee are “construction/regular maintenance of public utilities, security guard, cleaning, public water/electricity, insurance, handling fee of the management company” and so forth.
Maintenance fee differs from administration fee in that the former is for maintaining the security, safety, and value of the building in the long run. Tile replacement and regular check-up fees are included within. In the event of building renovation, the expenses will be initially covered by the maintenance fee. This is to prevent residents from sudden overspending in the case of such events by collecting monthly maintenance fee from each apartment owner in advance.
Q5 Are administration and maintenance fees mandatory of any property?
Yes, the above fees are required expenses of any property. The only exception is if you were to purchase a whole building.
Q6 What is “Surtaxes for Reconstruction Funding”?
“Surtaxes for Reconstruction Funding” is formed for the purpose of the 2011 Tohoku earthquake and tsunami relief fund. Announced on December 2, 2011, “Surtaxes for Reconstruction Funding” will come into effect on January 1, 2013. Increased taxes include capital gain tax, corporation tax, and resident tax. Surtaxes for Reconstruction Funding will be included within the capital gain tax. This tax must be paid along with the capital gain tax for the “Surtaxes for Reconstruction Funding” effective between January 1, 2013 and December 31, 2037. Non-Japanese residents who have properties in Japan will also be required to pay this tax. The tax fee is around 2.1% of the capital gain tax.
If you are an owner who needs to pay the 20% withholding tax (this is a prepaid tax), then you are also subject to pay 2.1% of the withholding tax for “Surtaxes for Reconstruction Funding.”
Total Tax = 20% withholding tax + (20% withholding tax * 2.1% )
During annual tax filing, any excessive amount paid initially will be refunded to you. For owners not subject to the 20% withholding tax, 2.1% of the capital gain tax will be taken from you during tax filing.
Total Tax = capital gain tax + (capital gain tax * 2.1%)
※Because there are established contracts between Hong Kong and Japan, you may be subject to tax exemption or tax reduction (of surtaxes for reconstruction funding) when you apply to the Japanese Tax Agency. The actual tax reduction will vary by case. To apply, please fill out the form found on the website of the Japanese Tax Agency or make a trip there and complete a form in person.
※The above information is provided by the Japanese Tax Agency.