Case of Real Estate Investment by Non-resident

Today we would like to talk about the points to note when non-residents invest in real estate. When investing in real estate in Japan, it does not matter whether the buyer is Japanese, resident or non-resident. However, if you are a non-resident and you want to get rent from the property you invest in, then note the following:

Cases other than the rent paid by individuals who rented the land and house for themselves or their relatives to reside in.
So what happens in the case above? The National Tax Agency has the following information.

No.12014 Real estate income of non-residents
https://www.nta.go.jp/english/taxes/individual/12014.htm

A non-resident purchased a real estate located in Nihonbashi and is renting it out to a Japanese company. The company will withhold tax at 20.42%. How should the non-resident declare this transaction in the final tax return?

Income from renting out real estates located in Japan is considered to be income from domestic source. If a non-resident is renting out a property, the amount of lease multiplied by the tax rate of 20.42% will be withheld as withholding tax. However, taxes will not be withheld on rent paid by individuals who rented the land and house for themselves or their relatives to reside in. Non-residents are required to file a final tax return form to a District Director of Tax Office that has jurisdiction over the place for tax payment during the filing period for final tax return between February 16 and March 15 of the following year. The amount of withholding tax will be settled in the final tax return process. When a non-resident files the final tax return form, he/she is required to appoint a tax representative and submit a declaration naming the person to the Tax Office. A tax representative administers tax affairs on behalf of a non-resident. A tax representative should be a person who resides in Japan, such as relatives and tax accountants.

In such a case, there are two points to keep in mind.
First, the lessee has to pay the withholding tax collected to the tax office every month. This puts a heavy burden on the lessee and results in complicated tax procedures. If the rent is high, there is a possibility that the corporation has a lease agreement, and inevitably additional corporate paperwork will occur. Due to this increase in processing, there is a possibility that the lease contract will be terminated. Therefore, the method of avoiding such complicated processing from the lessee is to change the contract so that we will enter into a sublease agreement with the landlord, enter into a lease through us, and we will be obligated to pay tax. By doing this, the original lessee will rent a room from us, so there will be no additional burden. 
Our additional operating costs are covered by normal property management fees and are not incurred separately.

The second point is to make the tax accountant a partner of the tax advisor. Every year, you will be required to file a tax return for real estate income, and at the same time, please request a refund for the withholding tax. By doing this, you will be asked to refund the tax by accurately claiming the tax and overpaying the tax.

The above are points to keep in mind when investing in real estate. These cases include special circumstances, so please consult us individually. We can also introduce tax accountants who are fluent in English and Chinese. Please contact us for more details.