Renting Out Japanese Property from Abroad: 20.42% Withholding

What changes when you live abroad

Japan taxes non-residents only on income from Japanese sources. Rent from a property in Japan is Japanese-source income, so it is taxed here at the normal progressive rates, after expenses and depreciation. What you earn in your home country is not part of the Japanese return.

• No resident tax: the 10% local tax is charged only to people with an address in Japan on January 1.
• Only the basic deduction: non-residents cannot claim deductions for a spouse, dependants, social insurance or life insurance. The basic deduction is up to ¥620,000 from 2026.
• No offset against your salary: a rental loss cannot reduce tax on income earned abroad. It is simply lost for Japanese tax.

Residency depends on where you live, not on nationality. A Japanese citizen working in Singapore is a non-resident; a foreign national living in Tokyo is a resident.

The 20.42% withholding

1. Rent ¥1,056,000 a year

   paid by a company

   →

2. Payer withholds 20.42%

   ¥215,635

   →

3. You receive the rest

   the payer remits the tax

   →

4. Tax return settles it

   refund or extra tax

Whoever pays rent to a non-resident must withhold 20.42% (income tax 20% plus the 2.1% reconstruction surtax) and pay it to the tax office by the 10th of the next month. The only exception is an individual who rents the home to live in it themselves or with family.

Under a master lease the management company is your tenant, so it is the payer. Under a collection-only contract the tenant is the payer and the agent just passes the money on. Ask your management company which applies and how they handle it.

Example: the ¥22 million condo, bought for cash

The same condo as in our other articles: ¥22,000,000, 14 years old, rent ¥88,000 a month. Many non-residents cannot get a Japanese loan, so here it is bought for cash. Suppose the whole rent is paid by a company and withheld.

Rent minus management fee, repair reserve, collection fee, property tax and depreciation leaves real estate income of ¥491,479, below the basic deduction. No tax is due, so the full ¥215,635 withheld comes back, but only if you file. In years 1 to 3 the equipment depreciation creates a loss (¥820,680 in year 2), so again no tax is due and the withholding is refunded in full.

When tax is due

Withholding is 20.42% of the gross rent, but the final tax is on the net income after expenses. Unless you own several units with little depreciation left, the withholding is usually more than the tax, and the difference is refunded.