Housing Taxes: Consumption Tax

It is common practice for the seller and the buyer to settle the property tax and city planning tax associated with the sale and purchase of the house. It should be noted that the settlement of taxes and public dues for the building is included in the consumption taxable amount.

The owner of the property as of January 1 shall be liable for the property tax and city planning tax. Even if the house is transferred to another party after January 1, the taxpayer will remain the same. Therefore, in the sale and purchase of real estate, including housing, it is customary to prorate the property tax and city planning tax on a daily basis based on the date of delivery and settle the taxes between the seller and the buyer.

However,  this is a “voluntary” settlement between the seller and the buyer in the purchase and sale of a house, and the tax and public dues settlement to be given and received is treated as part of the transfer price of the building. This amount is not considered taxes for tax purposes. Therefore, when consumption tax is imposed on the building, the consumption tax is calculated by including the settlement of taxes and public dues paid by the buyer to the seller in the transfer consideration.