Real Estate Agent Fees When Buying Property for a Minpaku Business in Japan

“I can calculate the motion of heavenly bodies but not the madness of people.” ― Isaac Newton

Hello, my name is Taisei Koshida, and I am a certified public accountant and tax accountant in Japan.

I assist foreign business owners who may have difficulty dealing with Japanese accounting and tax procedures.

If you are planning to buy a property in Japan for a minpaku (private lodging) business, you may need to pay a real estate agent fee.

How is the fee calculated, and how does consumption tax on the property affect the calculation?

Let’s look at the basic rules.

1. How Are Real Estate Agent Fees Calculated in Japan?

In Japan, there is a legal maximum on the brokerage fee that a real estate agent can charge for a property transaction.

For a typical property priced above JPY 4 million, the maximum brokerage fee is commonly calculated using the following simplified formula:

Property price × 3% + JPY 60,000

Consumption tax is then added to the brokerage fee itself.

When the property price includes consumption tax on the building, however, the consumption tax portion of the property price is excluded when calculating the brokerage fee.

2. When the Seller Is an Individual

When an individual sells a residential property as a private transaction rather than as part of a business, the sale of the building is generally not subject to consumption tax.

The sale of land is also not subject to consumption tax.

Therefore, in a typical private sale of a residential property, there may be no consumption tax included in the property price that needs to be excluded when calculating the brokerage fee.

3. When the Seller Is a Business

When the seller is a business and the sale of the building is subject to consumption tax, the treatment is different.

The sale of land is not subject to Japanese consumption tax, while the sale of a building by a taxable business may be subject to consumption tax.

When calculating the brokerage fee, the consumption tax included in the building price should be excluded from the property price used for the calculation.

For a high-value property, this difference can affect the amount of the brokerage fee.

4. Why Consumption Tax Matters

When buying property in Japan, it is important to distinguish between consumption tax on the property itself and consumption tax on the real estate agent fee.

Land is not subject to consumption tax, and whether the building price includes consumption tax depends on the seller and the nature of the transaction.

The brokerage fee itself, on the other hand, is generally subject to consumption tax.

If you are buying an expensive property for a minpaku or other business, checking the calculation carefully can help you understand your actual acquisition costs.

Koshida Accounting and Tax Office assists foreign business owners in Japan with accounting and tax matters.

If you are planning to purchase property for a minpaku or other business in Japan and need advice on Japanese tax matters, please feel free to contact us through the inquiry form.