Starting a Short-Term Rental (Minpaku) Business in Japan: A Tax Guide for Foreigners

With the popularity of Japan as a tourist destination, many foreign investors and residents are exploring opportunities in the short-term rental (Minpaku) business. However, running a Minpaku in Japan requires not only compliance with local regulations but also careful attention to tax obligations. This article outlines the key tax considerations for foreigners interested in operating a Minpaku in Japan.

Here’s what you need to know about Minpaku.

1. Business Registration and Legal Structure

Before considering taxes, you must determine how you will operate:

• As an individual (sole proprietor): Common for residents of Japan.

• Through a Japanese company (e.g., GK or KK): Often used by non-residents or investors.

• Via a property management company: An option for passive investors.

Regardless of your choice, proper registration with the local government and a Minpaku business license under the Private Lodging Business Act (住宅宿泊事業法) are essential.

2. Tax Obligations for Minpaku Operators

a. Income Tax (for individuals) / Corporate Tax (for companies)

• Income from Minpaku is generally considered business income.

• Individual operators must file an annual income tax return (確定申告) between February 16 and March 15 each year.

• Corporate entities must file a corporate tax return (法人税申告書) within 2 months after the end of the fiscal year.

Tip: Even non-residents with rental income from Japan may have a filing obligation and may need to appoint a tax representative (納税管理人).

b. Consumption Tax (VAT)

• If your total annual turnover exceeds 10 million yen, you're generally subject to Japanese consumption tax (currently 10%).

• You may need to register for consumption tax and file quarterly or annual returns.

• Some foreign-owned companies use the invoice-based system (インボイス制度), effective from October 2023.

c. Fixed Asset Tax and City Planning Tax

• These are local taxes imposed on property owners in Japan.

• Even if you lease a property and sublet it, some costs may be passed on to you depending on your contract.

d. Accommodation Tax

• In cities like Tokyo, Osaka, and Kyoto, a per-night accommodation tax applies, typically charged to guests but reported by the host or platform.

• Rates vary by location (e.g., 100–300 yen per person per night in Tokyo).

  
  

3. Withholding Tax for Non-Residents

If you are a non-resident earning income from Japan:

• A 20.42% withholding tax may apply to rental income.

• However, tax treaties between Japan and your country of residence might reduce this rate.

• Appointing a tax agent in Japan is mandatory.

  
  

4. Recordkeeping and Deductions

To reduce your taxable income, you can deduct expenses related to the Minpaku business, such as:

• Rent or mortgage interest

• Repairs and maintenance

• Cleaning services

• Advertising and listing fees

• Utilities and Internet

• Depreciation of furnishings

Make sure to keep proper receipts and maintain clear financial records.

5. Hiring a Tax Accountant

Tax in Japan can be complex—especially for foreigners. A bilingual certified tax accountant (税理士) can help you:

• Understand your obligations

• Prepare and file tax returns

• Register for necessary taxes

• Represent you with the Japanese tax office

  
  

Conclusion

The Japanese Minpaku business offers promising returns, but it comes with strict regulatory and tax requirements. Whether you're a resident or overseas investor, understanding your tax duties is essential to running a successful and compliant operation.

If you're unsure about your specific situation, consult a qualified tax professional familiar with Japanese real estate and cross-border taxation.

Tokyo Advisory will act as your tax agent

if you are a non-resident in Japan,

assisting with income tax filings

under a valid tax accountant license in Japan.