Real estate investment in Japan by Chinese investors has been increasing year by year. The main factors driving this trend include the weakening of the yen, the stability of the Japanese real estate market, and the high yields in urban areas, particularly in Tokyo and Osaka. Investment targets range widely, from investment apartments and high-rise condominiums to resort properties in regional areas.
Points to Note Regarding China-Specific Registration Procedures
No Certificate of Seal Registration
China does not have a system of personal seal certificates like Japan’s. While seals (yinchang) do exist in China, it is not common for individuals to own them, and there is no system for issuing seal certificates.
Therefore, the following alternative documents are required for real estate registration:
- Certificate of Signature: Have your signature authenticated at the Chinese Embassy or Consulate in Japan
- Affidavit: Prepared at a notary office in China (equivalent to a notary public office) and authenticated with a signature
Forms of Signature Certification
There are two types of signature certificates: the “endorsement format” and the “standalone format.”
- Endorsement Format: A format in which a notary public or similar official directly certifies the signature on a power of attorney. This offers a high degree of certainty
- Standalone Format: An independent signature certificate. It is valid if the signature is determined to be identical to the one on the application form or power of attorney
Substitute for Resident Registration Certificate
Chinese nationals on short-term stays or residing overseas cannot obtain a Resident Certificate, so the following documents serve as substitutes:
- Affidavit + Copy of Passport (with certification of authenticity)
- Proof of address issued by a notary office in China
Regulations on Remittances from China
One of the biggest hurdles for Chinese investors is transferring funds. China has strict foreign exchange regulations enforced by the State Administration of Foreign Exchange, and the annual limit for individual overseas remittances is set at 50,000 USD.
Practical Approach
- A method involving transferring funds over multiple years to accumulate capital in a Japanese bank account
- Remittances via third countries such as Hong Kong or Singapore
- Financial assistance from relatives who already hold assets in Japan
Real estate companies must carefully verify the source of funds. From an anti-money laundering perspective, it is also important to clearly understand the flow of funds.
Taxes and Tax Agents
When a non-resident living in China owns real estate in Japan, the following taxes apply:
- Property Tax and City Planning Tax: Annual holding costs
- Real Estate Acquisition Tax: Levied once at the time of purchase
- Capital Gains Tax: Taxed on profits upon sale (tax rate varies depending on holding period)
Appointing a tax representative is mandatory. Since all notifications from the tax office are sent to the tax representative, collaboration with a trusted tax accountant or real estate management company is essential.
Foreign Exchange Act Filing
If a Chinese national who is a non-resident acquires real estate, a notification must be filed with the Bank of Japan within 20 days of the transaction. Investment properties are generally subject to this notification requirement. While residential properties (for the owner’s or a relative’s residence) are exempt, vacation homes and second homes are subject to the requirement.
Changes to Registration Requirements Effective 2024
- Mandatory Romanization: Chinese names must be included in Romanized form (Pinyin) on ownership registration records. All letters must be uppercase, in the order of surname followed by given name.
- Registration of a Domestic Contact Address: If the investor does not have an address in Japan, a domestic contact address must be registered
Points to Note When Dealing with Chinese Investors
- Prepare Chinese translations of contracts and important disclosure documents (legally valid in Japanese, but provided to facilitate understanding)
- Differences in Business Practices (Negotiation styles may differ; some may prefer direct negotiations without an intermediary)
- Communication via Chinese social media platforms such as WeChat is common
- It tends to be difficult to get in touch around the Chinese New Year
Frequently Asked Questions (FAQ)
Q. Can Chinese nationals obtain a mortgage from a Japanese bank?
As a non-resident, obtaining a mortgage from a Japanese bank is generally difficult. If you have a valid residence status and income in Japan, some financial institutions may accommodate you, but the screening criteria are stricter than for Japanese nationals. In most cases, cash purchases are the norm.
Q. Are there any legal ways to comply with China’s foreign exchange regulations?
Options include planned remittances over several years or utilizing assets already held overseas. In any case, proof that the funds are being transferred legally is required. We recommend consulting a specialist if you have any questions.
