Japan Property Tax for STR Owners: Three Things Foreign Investors Miss, and the 2027 Reassessment

If the property tax in your yield model is the figure the seller paid on a home, it may be far too low once the building is used as a licensed lodging. Here is how Japan's fixed asset tax works for short-term rentals, and what changes in fiscal 2027.

The short answer: Japan levies an annual fixed asset tax (kotei shisan zei) on land, buildings and business assets, plus a city planning tax (toshi keikaku zei) in designated urban areas. Residential land gets a large tax break: its taxable value can be cut to as little as one-sixth. Tokyo's tax bureau, however, lists the sites of ryokan-type business buildings as non-residential land. So if you buy a house and run it under a Hotel Business Act licence, the land tax can rise several times over. In our view, foreign owners most often miss three things: (1) the loss of the residential land break when a property becomes a licensed lodging; (2) the yearly filing for furniture and appliances as depreciable business assets, due every 31 January; and (3) the land and building reassessment in fiscal 2027, which may start to reflect recent land price rises. Owners who live outside Japan must also appoint a local tax representative. Our assumption-based examples show the impact is largest for small, lower-rate city properties and modest for high-rate whole-house rentals. Before you buy, check the official valuation certificate and ask the municipality how the land will be treated once the property is converted.

1. How the tax works: the minimum you need to know

• Assessment date. Tax is charged to whoever owns the property on 1 January each year (Ministry of Internal Affairs and Communications overview).
• Rates. The standard fixed asset tax rate is 1.4%. The city planning tax cannot exceed 0.3% under the Local Tax Act. Yokohama, for example, applies 1.4% and 0.3%.
• Taxable value. The "taxable standard" (kazei hyojun) is the base the rate is applied to. For land and buildings it is, in principle, the assessed value.
• Exemption thresholds. No tax is levied if the taxable value is below the threshold. The current thresholds are ¥300,000 for land, ¥200,000 for buildings and ¥1.5 million for depreciable assets. From fiscal 2027 the building threshold rises to ¥300,000 and the asset threshold to ¥1.8 million.
• Who collects it. Municipalities levy the tax. In Tokyo's 23 wards, the Tokyo Metropolitan Government collects it through the metropolitan tax office for each ward.

2. Issue one: licensed lodging loses the residential land break

What the break is worth

For residential land, the taxable value for fixed asset tax is one-third of the assessed value. The first 200 m² per dwelling ("small-scale residential land") is reduced further, to one-sixth. For city planning tax the fractions are two-thirds and one-third. This is why residential land in Japan often looks lightly taxed.

Licensed lodging (ryokan licence)

Tokyo's Bureau of Taxation, in its guidance on the residential land declaration, lists the sites of ryokan-type business buildings as non-residential land. Under the Hotel Business Act, a lodging business needs a licence from the prefectural governor, or from the mayor or ward head where the city or ward runs its own public health centre. Kan'i shukusho (simple lodging facility) is one licence category: a facility mainly built around sleeping areas shared by multiple guests. In our view, if you run a whole-house rental under a lodging licence, it is safest to assume the land will not qualify for the residential break. One exception: a mixed-use building whose residential part is at least a quarter of its total floor area can still count as residential, so a property where the owner lives on site is decided case by case.

Tokyo asks owners who change a building's use to file a declaration by 31 January of the following year. If the residential treatment simply carries on without a declaration, the owner may later be taxed retroactively.

Private lodging (minpaku)

Jutaku shukuhaku jigyo (private lodging business, commonly called minpaku) runs on a notification rather than a licence, and is capped at 180 nights a year. In a 2018 notice to local governments, the Ministry of Internal Affairs and Communications said the residential break should be decided on the actual use of the building: is it used as someone's home? Registering as a minpaku neither grants nor removes the break. The notice defines a home as a place where a specific person lives on an ongoing basis. Vacation homes used mainly for leisure, defined as not lived in for at least one day a month, are excluded either way.

A whole-house rental where nobody lives and the owner is absent may therefore struggle to count as a home, even under a minpaku notification. The tax office makes the final call.

Worked example: how much a home-based estimate can understate the tax

All figures below are assumptions for illustration.

• Case A (small central Tokyo property): 23 wards; 60 m² site; land valued at ¥60 million; building at ¥15 million; 1.4% fixed asset tax and 0.3% city planning tax. Average nightly rate ¥25,000 at 75% occupancy, giving annual revenue of about ¥6.84 million.
• Case B (high-rate whole house, Hakone or Fuji Five Lakes): 600 m² site; land valued at ¥30 million; building at ¥60 million (150 m² floor area); assumed to lie outside the city planning tax area. Nightly rate ¥120,000 at 55% occupancy, giving about ¥24.09 million a year.
• Home-based estimate: the residential break applies (all of A is small-scale; B gets one-sixth on the first 200 m² and one-third on the rest). Licensed lodging: the taxable value is 70% of the assessed value, the upper limit under the burden-adjustment rules for commercial land.
• Building tax is the same in both cases. The new-build reduction, Tokyo's own relief measures and the transition after a change of use are ignored.

Calculation (yen per year)

Annual tax compared (yen; each ■ = ¥50,000)

Annual tax as a share of revenue (%; each ■ = 1%)

In Case A the land tax rises about 3.6 times. Total tax goes up by about ¥514,000, or about 7.5 percentage points of revenue. In Case B the increase is about ¥177,000, or about 0.7 points. In these two cases, the gap was widest where three things coincided: land worth a lot relative to the building, a site of 200 m² or less that loses the full one-sixth break, and a low nightly rate, as in the small city property. Tokyo has its own relief measures, including half city planning tax on small residential land and a 20% reduction on small non-residential land (Shinagawa City council paper, February 2026). If these apply to Case A, the land tax becomes about ¥170,000 as a home and about ¥571,000 as a lodging, narrowing the gap to roughly ¥400,000. This ignores the 65% cap for commercial land.

Note that a resort property like Case B may be treated as a vacation home and miss the residential break in the first place.

3. Issue two: furniture and appliances must be declared every year

What, when and where

Depreciable assets (shokyaku shisan) are business assets other than land and buildings whose depreciation counts as an expense for income tax. Owners must report the assets they hold on 1 January to the municipality where the assets are located by 31 January. In the 23 wards, the report goes to the metropolitan tax office. Tokyo's depreciable asset page lists typical hotel and ryokan assets, including guest room equipment (beds, furniture, televisions), kitchen and laundry equipment, and furnishings. Kawasaki City's guide has a separate line for minpaku, listing signs, televisions, refrigerators, bedding, air conditioners and washing machines. Whether you hold a lodging licence or a minpaku notification, the furniture and appliances you use in the business can be taxable.

The municipality itself calculates whether you fall under the threshold, so you must file even if your assets are small (Chofu City guide). Under the Local Tax Act, municipalities may set a non-criminal fine of up to ¥100,000 by ordinance for failing to file without good reason.

Valuation and an example

In the first fiscal year after purchase, an asset is valued at cost × (1 − depreciation rate ÷ 2). After that, each year's value is the previous year's value × (1 − rate). The value never falls below 5% of cost. The rate for a five-year useful life is 0.369; the table below uses the residual factors from Chofu's table (0.815 and 0.631). Assumption: all furniture and appliances are bought during 2026 with a five-year life, costing ¥2 million for Case A and ¥5 million for Case B.

Because the threshold rises to ¥1.8 million from fiscal 2027, Case A's ¥1.63 million is not taxed (it would have been under the old ¥1.5 million threshold). Case B pays 1.4%, about ¥57,000. The threshold applies to the total value of all depreciable assets one owner holds in the same municipality.

In our view, the real risk is not the amount but a missed filing. If you deduct furniture for income tax but never file the asset report, the municipality may later ask for several past years at once.

4. Issue three: the fiscal 2027 reassessment and rising land prices

How reassessment works

Land and building values are reviewed every three years and otherwise held flat. Kofu City states that the next reassessment takes place in fiscal 2027. The previous one, in fiscal 2024, used official land prices as of 1 January 2023. Building land (takuchi), whether residential or commercial, is assessed at around 70% of the official published price. If the same approach is used, fiscal 2027 values will reflect land prices as of 1 January 2026; this is our estimate. The building valuation standards were also revised by ministry notice on 26 June 2026, effective from fiscal 2027.

How far land prices have risen

All figures are average year-on-year changes. In the 2025 official prices, too, the 23 wards rose 7.9% for residential land and 11.8% for commercial land. Where prices have kept climbing since the 1 January 2023 base, we think assessed values are likely to rise in fiscal 2027.

Tax bills rise gradually, not all at once

Burden-adjustment rules stop tax bills from jumping when values rise. Under Yokohama's fiscal 2026 explanation, the taxable value of residential land rises each year by 5% of its full target value. For commercial land, the key figure is the burden ratio: last year's taxable value divided by this year's assessed value. If the ratio is 60–70%, the taxable value is frozen; below 60%, 5% of the assessed value is added; above 70%, it is cut back to 70%.

If Case A's land value rose 30%, the land fixed asset tax would go from ¥140,000 to about ¥149,000 (+6.5%) as residential land, or from ¥588,000 to about ¥643,000 (+9.3%) as a lodging site. The increase is spread over several years rather than arriving in one step.

These rules were extended for fiscal 2024–2026 in the fiscal 2024 tax reform outline. We have not been able to confirm how they will apply from fiscal 2027 (as of November 2026). Tokyo's own relief measures, such as the 65% cap for commercial land and the 20% reduction for small non-residential land, were announced as continuing for fiscal 2026. Whether they continue after that is also unconfirmed.

5. For all three issues: tax representative and payment dates

If you have no address in the municipality, you must appoint a nozei kanrinin (tax representative) and notify the municipality (Tokyo Bureau of Taxation guidance). The representative receives the tax notices and handles payment on your behalf. This can be a friend living in Japan, a management company or a tax accountant. Some municipalities accept the filing online through eLTAX, Japan's local tax e-filing system.

The law sets payment in April, July, December and February, but each municipality fixes the exact dates and may set different ones for special reasons. Yokohama collects in April, July, December and the following February. In the 23 wards, fiscal 2026 notices went out on 1 June, with instalments due in June, September, December and the following March (the fourth fell on 1 March 2027). If you own in several areas, keep a payment calendar.

Owner checklist

The valuation certificate (hyoka shomei) is an official document from the municipality certifying the assessed and taxable values (Tokyo Bureau of Taxation FAQ). Tax judgements and filings belong with a tax accountant; whether a filing is needed and how the break applies is ultimately decided by the municipality. A management company is best placed to supply the inputs: an inventory of furniture and appliances with purchase dates, and records of how the property operates. In our view, missed filings often start with a missing inventory, so agree at the outset who keeps it: the owner, the accountant or the manager.

6. Short term, long term, and who is affected

• Short term (2026–2027): If you are buying, check whether the figures on the valuation certificate already include the residential break, and redo the numbers on a non-residential basis if you will operate under a lodging licence. If you already own, file the asset report by 31 January 2027 (threshold ¥1.8 million) and review your fiscal 2027 tax notice after reassessment.
• Long term (fiscal 2027 onward): In our view, land tax on small city properties may keep creeping up as land prices rise and burden adjustment phases the increase in. Whether the adjustment rules and Tokyo's relief continue after fiscal 2026 depends on future tax reforms.

In our view, for most investors property tax is less about whether to buy and more about how accurate the yield model is. In our examples, a high-rate whole-house rental with a well-invested site and building saw tax rise by less than one point of revenue even under a lodging licence. For a small, lower-rate city property, the yield can move by several points. We see no need for alarm; just don't reuse last year's tax bill unchanged. For related reading, see our guides to the Hotel Business Act versus the Housing Accommodation Business Act, how reliable STR yield projections are and 2026 land prices.

7. Where The Room fits

The Room specialises in operating high-rate, well-invested whole-house rentals in Tokyo, Kanagawa (including Hakone) and Yamanashi (including the Fuji Five Lakes). Choosing between a lodging licence and a minpaku notification shapes your tax position as well as your revenue. If you would like to discuss the numbers behind a purchase or how a property should be run, please get in touch.

This article is a general explanation based on publicly available information as of 2 November 2026. It does not guarantee any specific tax amount or eligibility for any relief. Confirm your own situation with a licensed Japanese tax accountant and the municipality where the property is located (in Tokyo's 23 wards, the metropolitan tax office).