The wife and I will be moving (permanently) back to Japan in a couple of years for our retirement and i have been obsessively modelling everything. I think i have a fairly good understanding of what we’re looking at, though i have yet to meet with a Japanese accountant to make sure I haven’t made any serious errors in my calculations (it’s on the list). One thing i would like confirmed is how renovated homes are treated in terms of real estate taxes.
In short, what happens if you do a complete renovation? Does the age of the building stay the same? We wouldn’t be adding any new sections. The assumption i have been working off is that the value of the building would go up dramatically, but the age would remain the same.
For example, lets say we buy a 60 year old wooden house whose value is really zero but we can say its worth 5m yen. Due to age, this is reduced to 20% of the value, or 1m yen. At 1.4%, the house tax would be 14,000 yen per year, right? (Tax on land is calculated separately, I know)
Now, let’s say we do a skeleton renovation and the renovated house is reappraised as being worth 50m yen but the age remains the same, right? As such the 50m valuation would be reduced to 20% or 10m yen—meaning the tax on the house would be 140,000 yen per year.
In contrast, if we did a new build appraised at 50m yen, after the two year discounted tax period expires, i think the taxable value would be 80% of the appraised value, or 40m yen. At 1.4% that comes to 560,000 yen per year.
Are my assumptions correct? I understand that tax on the new build will also go down over time, but its still a considerable difference. Am i missing something or is a renovation a much better way to go, at least in terms of property tax.
by NerveDull8478