Special Treatment for Residential Property Taxes to be Terminated in FY2022

The Japanese government plans to terminate in 2022 a special measure to alleviate property taxes for homeowners that was put in place this year to help people affected by the coronavirus-led economic downturn.

In Japan fixed asset taxes (or property taxes) are levied annually on the owner of a property as of January 1st, at the rate of 1.4% of the value of the property as indicated in the ‘fixed asset tax book’ (koteishisan kazeidaichou). This tax is paid in April, July, December and the following February. Asset values are revised every three years, with FY2021 being a tax revision year.

However, in 2021, the government allowed for special property tax treatment in order to support individuals and companies dealing with the economic fallout from the pandemic.

Property taxes assessed this fiscal year were based on the land value as of January 1, 2020, before the outbreak of the novel coronavirus. In cases where the FY2021 tax assessment is greater than for FY2020 due to an increase in land value, the tax payer is allowed to pay the lower amount that was assessed in FY2020 for a period of one year. Similarly, if the FY2021 tax assessment is lower than the amount assessed in FY2020, the tax payer will be allowed to pay the lower of the two amounts.

The Nikkei newspaper reports that the Liberal Democratic Party will compile its tax reform guidelines in early December and that the focus will be on tax incentives for companies to raise wages and on reducing the mortgage deduction rate. The LDP also plans to terminate the special tax treatment for residential property taxes described above. However, special tax treatment for commercial properties is to be adjusted by coordination between the LDP and the Komeito in order to avoid a drastic change in the tax burden for companies. Implementation of these proposals would take place in FY2022.

Property taxes are collected by municipal governments and are a main source of revenue for cities and towns, so the government also has to incentivize local governments to implement coronavirus counter measures to balance any possible changes in property tax revenue.

Source: Nikkei newspaper, Novemeber 2021 (in Japanese)

Lead photo: iStock 1310704103

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