Many people who are preparing to move into company housing because of a solo assignment or a job transfer are likely wondering what to expect. Company housing offers a range of advantages, but what you need to prepare can change significantly depending on whether it comes furnished. This article explains the types of company housing, their advantages and disadvantages, how to make use of furnished company housing, and key points to consider when choosing furniture.
What types of company housing are there?
Company-owned housing
This is a form of company housing in which the company provides apartments or housing complexes that it owns directly.With fewer procedures, move-in can be smooth, and in some cases there may also be facilities designed for families.
Leased company housing
In this arrangement, residents choose from properties that the company has leased under a corporate contract.Options range from condominiums and apartments to detached houses, and many companies use this model.
How it differs from an employee dormitory
Employee dormitories are mainly intended for single residents and often include meals, while company housing is generally centered on households.Dormitories with shared-room arrangements can limit privacy.
What is different between leased company housing and company-owned housing? Accounting and tax treatment
Leased company housing and company-owned housing differ not only in convenience for the resident, but also in how the company's accounting treatment begins. For company-owned housing, the building is recorded as a fixed asset of the company, and depreciation expenses, fixed asset tax, and repair costs are treated as deductible expenses for the company. For leased company housing, the company signs a lease contract with the landlord and then subleases the property to the employee, so the rent the company pays to the landlord is deductible as rent expense.
On the other hand, the method used to calculate the "amount equivalent to rent" that should be collected from the employee (if the company receives 50% or more of this amount from the employee, it is not taxed as salary) uses the same formula regardless of whether the housing is company-owned or leased. The National Tax Agency's Tax Answer states that the amount equivalent to rent is the total of (1) the taxable standard amount of the building's fixed asset tax × 0.2%, (2) JPY 12 × total floor area (m²) ÷ 3.3 (m²), and (3) the taxable standard amount of the land's fixed asset tax × 0.22%, "not only when a company etc. lends company housing or a dormitory that it owns, but also when it borrows a property from elsewhere and lends it" (National Tax Agency Tax Answer No. 2597). In other words, whether the housing is company-owned or leased does not change the standard the employee must bear; the difference mainly shows up in the company's accounting treatment (whether it capitalizes the asset and depreciates it, or expenses the rent).
What are the advantages and disadvantages of using company housing?
Advantages
- Good cost performance：You may be able to move in at rent that is substantially lower than market rates, and some cases also include utilities
- Fewer procedures：The company handles contracts and financial transactions
- Less sense of isolation：Having senior staff or colleagues living nearby can provide peace of mind
- Close to the workplace：A shorter commute gives you more personal time
Disadvantages
- You may not be able to live in your ideal property：Options are limited
- It can be difficult to switch between work and private life：Because colleagues live nearby, the boundary between work and personal life can easily become blurred
What are the advantages and disadvantages of furnished company housing?
Advantages
- No need to pay for a full set of furniture (typically starting from around JPY 200,000)
- Moving belongings can be reduced significantly
- There is also no need to pay disposal costs for furniture when moving out
Disadvantages
- Because you cannot bring in your preferred furniture, there is less freedom in interior styling
- Much of the furniture is secondhand, which may raise hygiene concerns for some people (it is generally cleaned before move-in)
Taxation of furnished company housing—the loan of furniture and appliances is assessed for tax purposes separately from rent
When a company lends furniture and appliances to company housing free of charge or at a low cost, the tax treatment is, in principle, assessed separately from the calculation of the rent (the amount equivalent to rent) for the housing itself. The National Tax Agency's Q&A case "Economic benefit when furniture etc. is lent to an employee" (treatment based on Article 36, Paragraphs 1 and 2 of the Income Tax Act) states that, for furniture etc. owned by the company, the economic benefit should be assessed as a reasonably estimated amount based on the depreciation expense equivalent calculated under the straight-line method plus the amount ordinarily required for maintenance and management, while for leased furniture etc., the economic benefit should be assessed as the amount equivalent to the lease payment.
In practice, if the rent for company housing that comes with furniture and appliances stays within the range of an employee benefit, tax issues often do not surface. Even so, the loan of furniture and appliances should not simply be included in the calculation of the housing's rent; as a general rule, staff in charge should keep in mind that the economic benefit must be assessed separately. Note that if the furniture and appliances are lent free of charge or at a significantly reduced cost, this amount equivalent to the economic benefit may potentially be taxed as salary.
What are the key points when choosing furniture for unfurnished company housing?
- Prioritize buying large furniture items such as a bed and shelving first, and leave small items until later
- Check the dimensions of the entrance, hallway, and elevator in advance to make sure the furniture can be brought in
- Confirm the locations of power outlets and the TV antenna terminal before deciding on the layout
- Using a consistent style for colors and materials helps create an attractive space
How the burden of restoration is divided—who pays when moving out, the company or the employee
Article 621 of the Civil Code (as amended, effective April 1, 2020) provides, regarding a lessee's obligation to restore the property to its original condition, that "if the leased property has been damaged after the lessee received it (excluding wear and tear arising from ordinary use and the benefit derived from it, and excluding deterioration of the leased property due to the passage of time), the lessee is obligated to restore that damage to its original condition when the lease ends," clearly excluding ordinary wear and age-related deterioration from the obligation to restore. The Ministry of Land, Infrastructure, Transport and Tourism's "Guidelines on Disputes over Restoration to Original Condition" likewise defines restoration as "restoring the decrease in the value of the building arising from the lessee's residence and use, among the wear and damage caused by the lessee's intent or negligence, breach of the duty of care of a good manager, or other use exceeding ordinary use," presenting as a standard the idea that the landlord bears the cost of ordinary wear and age-related deterioration, while the lessee bears the cost of wear and damage exceeding that.
Company housing is an extension of this general principle. In the case of leased company housing, because the company is the lessee under the lease contract with the landlord, the company itself bears the obligation to restore the property to the landlord, but under internal company rules, it is common practice to bill the employee for damage caused by the employee's intent or negligence. The same thinking applies to company-owned housing: the company bears the cost of ordinary wear and age-related deterioration, and in principle only asks the employee to cover damage beyond that. The same applies to built-in furniture—the arrangement in which damage from age-related deterioration is borne by the company and damage from negligence is borne by the employee directly reflects this way of dividing the burden of restoration.
Frequently Asked Questions (FAQ)
Q. Who bears the cost if built-in furniture is damaged?
As a general rule, damage caused by normal wear and tear is covered by the company, while damage caused by negligence is borne by the resident. It is important to record the condition of the furniture when moving in.
Q. Can I dispose of or sell built-in furniture?
Because it is company property, disposing of or selling it without permission could potentially be treated as theft or embezzlement. You should not do this under any circumstances.
Q. How much is the rent for company housing?
It varies by company, but a common benchmark is around 30% to 50% of market rent. In many cases, it is automatically deducted from monthly salary, so it is important to confirm the amount in advance.
Q. What should I do if a problem occurs in company housing?
The basic rule is to report it to both the property management company and your employer. Even in urgent situations, make sure not to forget to contact the department in charge at your company first.
