Fixed Asset Tax (Kotei Shisan-zei): What It Is and Who Pays It

Every owner of real property in Japan — resident or not — is liable for kotei shisan-zei, Japan’s fixed asset tax, from the moment title is registered. If you own a short-term rental apartment in Osaka or a machiya in Kyoto that you’ve never personally visited, this tax lands on your doorstep each year regardless of whether the property earns a single yen. Understanding who calculates it, who collects it, and how an overseas owner actually handles it is not optional housekeeping — it determines whether your investment is solvent.

What kotei shisan-zei is and how Japan’s property tax is calculated

Fixed asset tax (固定資産税, kotei shisan-zei) is a local government tax levied annually by the municipality where the property sits — Tokyo, Osaka, Kyoto each run their own assessment offices. The standard rate is 1.4% of the property’s assessed value (kotei shisan hyoka-gaku), though some municipalities apply a slightly different rate under local ordinance. The assessed value is typically set at somewhere between 60–70% of market value and is formally reappraised every three years by the local authority.

Most residential properties also attract the City Planning Tax (toshi keikaku-zei) on top, generally up to 0.3% of assessed value, if the land sits within an urbanisation promotion area. For a compact urban rental unit, the combined annual bill often runs in the range of ¥60,000–¥200,000, depending on location, floor area, and land valuation — though premium locations in central Tokyo or Kyoto’s popular machiya belt can run considerably higher.

Importantly, there is a residential land tax reduction: land used for residential buildings can qualify for a reduction on the land portion — to one-sixth of the standard assessment for plots up to 200 square metres. If a property is converted from residential to business use and loses that classification, the reduction can be stripped. This is relevant for some ryokan licence structures where the building is reclassified.

Who actually pays it — and how, when you’re abroad

The municipality mails a tax payment notice (nozei tsuchisho) to the address on the registration record — which for many overseas owners is either a Japanese nominee address or, more often, an address that nobody is monitoring. Payment is due in four instalments, typically in April, July, December, and February, though this varies by municipality. Missed payments attract late penalties.

Non-resident owners must nominate a tax representative in Japan (nozei kanrinin) — a legal requirement under the Local Tax Act for property owners without a domestic address. In practice, this is often the property management company, a tax accountant (zeirishi), or a dedicated administrative agent. At Stay Buddy, we coordinate this appointment for the owners we work with, because a missed nozei kanrinin registration is precisely the kind of administrative gap that produces penalty notices nobody sees until months later.

Payment itself can be handled via bank transfer from a Japanese account (which your management company may operate on your behalf under a proper trust arrangement), convenience store payment, or — increasingly — via municipality-specific online portals. If you do not have a Japanese bank account, you are structurally dependent on whoever holds one in Japan acting for you, which is why the trust relationship with your operator matters beyond just occupancy rates.

The interaction with rental income tax for overseas owners

Fixed asset tax is a deductible expense against rental income for Japanese income tax purposes — meaning the annual bill reduces the taxable base on which the National Tax Agency (NTA) assesses your rental profits. For a non-resident owner, rental income from Japanese property is subject to Japanese income tax at source: your operator or tenant is legally required to withhold 20.42% from rent payments before remitting the balance to you, under Article 212 of the Income Tax Act. This is separate from fixed asset tax but interacts with it when you file (or your tax representative files on your behalf) an annual return to claim deductions.

Consumption tax (shohi-zei, currently 10%) does not apply to residential rental income but does apply if the property operates under a ryokan business licence (ryokan gyou kyoka, granted under the Hotel Business Act) and annual taxable sales exceed ¥10 million. This threshold matters for minpaku operators who are scaling across multiple properties under one entity.

How this plays out on the ground — a real example

We manage a machiya property in a historic district for an owner based in the Netherlands. Last autumn, the municipality sent the Q3 tax instalment notice to the property address itself — not to the registered nozei kanrinin address — because a clerical change in the municipality’s system had reverted the delivery record. Our local cleaning vendor noticed the envelope during a post-checkout inspection and flagged it to us. We had perhaps ten days before the payment deadline.

The judgement call: do we pay from the owner’s operating float we hold in escrow (which we are authorised to use for operating expenses), or do we wait for explicit owner approval and risk a late fee? Given that the float authorisation letter explicitly covered municipal tax obligations, we paid immediately and sent the owner a same-day notification with the receipt scanned. The owner was grateful. But the real lesson is structural: without a local presence doing physical inspections with eyes on the post, that notice sits in an envelope for weeks. Remote ownership of Japanese property is not a passive arrangement.

What to ask your management company before you sign

If you’re appointing an operator to manage your Japanese rental, the kotei shisan-zei question is a useful diagnostic. Ask these specifically:

• Are you registered as my nozei kanrinin, or will you arrange that separately? If they give a vague answer, that’s a gap in the service.
• What address does the municipality hold for tax notices? It should be the kanrinin’s address, verified, not the property address.
• How are tax payments handled from operating funds? You want a clear written answer about what the operator is authorised to pay on your behalf and with what documentation.
• How are quarterly and annual accounts reported to me? Fixed asset tax should appear as a line item, not buried in a vague “expenses” column.

On management fees: across the Japanese short-term rental market — whether minpaku under the Housing Accommodation Business Act (with its 180-day annual operating cap) or ryokan-licensed properties under the Hotel Business Act — operator fees typically range from 10–25% of revenue, depending on the scope of service, property type, location, and the degree of hands-on involvement. A company doing full-cycle operations including compliance, guest management, linen, and tax administration will be toward the upper end of that range. Be sceptical of any proposal significantly outside it in either direction without a clear explanation.

Licensing structure affects tax classification — know which regime you’re in

The licensing regime you operate under has indirect tax consequences worth understanding. Under the Minpaku Law (Housing Accommodation Business Act, enacted 2018), operating days are capped at 180 per year nationally, with many municipalities imposing tighter local restrictions. Kyoto, for instance, restricts minpaku to non-residential zones or specific periods. This cap compresses revenue potential, which affects your ability to absorb fixed costs including fixed asset tax.

A ryokan business licence (Hotel Business Act) removes the 180-day cap and allows year-round operation, but requires meeting Fire Service Act (Shobo-ho) compliance standards — fire doors, sprinklers, emergency lighting depending on building type and floor area — and ongoing municipal inspection obligations. These are not trivial costs, but for a property in a high-demand location, the full-year operating window makes them worthwhile.

Regarding national strategic special zone minpaku (tokku minpaku): as of 29 May 2026, Osaka City has permanently closed new applications. Existing certified facilities may continue, but no new tokku minpaku can be established in Osaka. Owners considering new Osaka openings should evaluate either standard Minpaku Law registration or a ryokan licence, depending on the property and intended operating model.

Work with Stay Buddy

We operate short-term rental and ryokan properties across Japan for owners who are not on the ground. If you’re working through what a Japan acquisition actually costs to hold — fixed asset tax, compliance, management, and tax administration included — we’re glad to walk through it with you based on the specific property and location you’re considering. Get in touch with Stay Buddy.

Written by the Stay Buddy Japan team. This content was produced with AI assistance and reviewed for accuracy.