What is a Sublease Property in Japan?


How does the sublease contract work?

Sublease contract is to sublease to the third party.
In the sublease contract, a fixed amount of rent (lower than marker rent price) is paid to the owner regardless occupancy during the contract period by sublease company. Normally, the owner must pay building management fee and maintenance funds for every month, but in the case of subleasing, only the maintenance funds will be borne by the owner.

Let’s take an example for clarify.
The following 2 properties are same apartment for sale.

(Property 1)
-Sale price: 3,100,000 Yen
-Building management fee+ maintenance fee: 9,080Yen/month
-Rent: 29,000 Yen/month

(Property 2 )※Sublease contract
-Sale price: 2,600,000 Yen
-Building management fee+maintenance fee: 5,080 Yen/month
-Rent: 17,800 Yen/month

At this point, why does the sale price so diffrent?
→Usually investment properties pricing such as selling price is calculated from rent income. So simply higher rent the higher property price. In fact if there are two units for sale in the same building, and those two rents are different, then the selling price is also different even those two are in the same building and the same size.

One more point you have to concern when you buy a property which is used as commercial purpose such as sublease contract and office use.

It is a “Withholding tax”. 源泉徴収税 in Japanese (Gensencyosyuzei) Here is a simple explanation about “withholding tax”
if your property is used for personal residence, it is not required to pay withholding tax. On the other hand, if it is used for commercial purpose such as office and shop, it is required to pay it.
Basically, when the tenant is commercial such as company, the tenant must pay consumption tax.
But this consumption tax is NOT yours, this is something you have to return to the government.(we also call it “temporary receive tax”)
But if the rent + consumption tax goes to overseas, tax office’s concern is “Can tax office get this consumption tax back from the landlord?”
So tax office set the law, saying, “when the landlord is oversea people and the tenant is commercial use, the tenant MUST pay 20% to the tax office and 80% to the landlord. “
“And if the landlord want this 20% back, please file the tax return.”
So this law is to force landlord to FILE tax. AND Avoid oversea people to not paying consumption tax.

※You will get this 20% back after filling tax.
How much is the tax filling?
→It is 15,000 yen (basic fee) and 7,000 yen(per property).

I hope it helps for your understanding.

Please feel free to contract me!

Have a nice day.

Gran Asset Management Inc.8/F 2-2-3 Maizuru Chuo, Fukuoka Japan 810-0073
P:(+81)92-753-9578 / F:(+81)92-753-9587
E-Mail : japan-investment@gran-am.com
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