Gains on sales of stocks and real property are taxed separately from other income. As noted below, taxpayers who are residents of Japan for tax purposes are subject to a slightly higher rate due to the Local Inhabitant Tax component.
Capital gains on real property held for more than five years as of 1 January of the year of the sale are taxed at the long term rate of 20% (15% National Income Tax, 5% Local Inhabitant Tax). Gains on real property held for a shorter period are taxed at 39% (30% National Income Tax, 9% Local Inhabitant Tax). Additional 2.1% surtax will be applied on the amount of National Income Tax.
Capital losses from the sale of real property can be deducted only from capital gains on real property. Capital losses on the taxpayer’s principal residence can be carried forward three years. Otherwise, there is generally no carry forward of capital losses on real property for individuals.
Taxation of capital gains from the sale of foreign listed shares
The tax rate on capital gains from the sale of shares is 20% (15% National Income Tax, 5% Local Income Tax). Additional 2.1% surtax will be applied on the amount of National Income Tax
Capital loss from the sale of listed shares
A capital loss from the sale of listed shares can be offset against capital gains from the sale of listed shares in the same calendar year. If after offsetting a capital loss still remains, it generally cannot be offset against any other types of income. For example, you are not allowed to offset a capital loss on the sale of listed shares from salary income. However, if the loss contains a capital loss from the sale of listed shares sold through a securities company registered in Japan, this portion can be deducted from dividend income paid by listed companies if the ‘Separate Taxation System’ on dividends has been selected.