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2026-09-09
The residential land special rule for fixed asset tax, and city planning tax ― the truth about "demolish the house and the tax goes up sixfold"
Land with a house on it has its fixed asset tax (固定資産税) reduced by up to one sixth and its city planning tax (都市計画税) by up to one third. This is the residential land special rule (住宅用地の特例). Demolish an old family home and the special rule falls away, which is why people say "the tax goes up sixfold", but the real increase depends on the property. This article explains how the rule works, the 200 square metre line, how a recommendation on a poorly managed vacant house removes the rule, what city planning tax is for, and how to use the 1 January assessment date.
About this translation ― This page is an English translation of an article originally written in Japanese by KuraLab's operator, a licensed real-estate transaction specialist (宅地建物取引士) and administrative scrivener (行政書士) in Japan. The Japanese original is the authoritative text; where the two differ, the Japanese version prevails. The article explains Japanese law and procedure in general terms as of the date shown. It is not legal, tax or immigration advice for your situation ― please confirm with a licensed professional in Japan. Japanese terms are kept in parentheses so you can search for them. Read the Japanese original
"The agent told me it goes up sixfold if I demolish it." The man who brought a quotation for demolishing his family home also brought the fixed asset tax notice. Land valued at 18,000,000 yen, 180 square metres; building valued at 1,000,000 yen, 48 years old. The current annual tax, land, building and city planning tax together, was about 63,000 yen. "Sixfold would be 380,000 yen, wouldn't it?" It would not. When we calculated it, it came to about 214,000 yen. This article is about the difference between 380,000 yen and 214,000 yen.
"Demolish the family home and the fixed asset tax goes up sixfold." In consultations about vacant houses, this line comes up almost without fail. It is half right and half wrong. Knowing how it works changes your decisions about when to demolish and when to sell.
Fixed asset tax is levied by the municipality on whoever owns the property on 1 January each year. The standard rate is 1.4% and the tax base is the fixed asset tax valuation. The valuation described in another article on this site is used as it is. Here the "residential land special rule" (住宅用地の特例) comes in. For land with a house on it, the portion up to 200 square metres (small-scale residential land) has its tax base cut to one sixth, and the portion above 200 square metres (general residential land) to one third. For a 300 square metre lot, 200 square metres are at one sixth and 100 square metres at one third.
City planning tax is a municipal tax levied together with fixed asset tax on land and buildings in urbanisation promotion areas (市街化区域), with a maximum rate of 0.3% (some municipalities use 0.2% or similar, and some do not levy it at all). It applies to the urbanisation promotion area in the classification described in another article on this site, and is spent on city planning projects such as roads and parks. It also has a residential land special rule: one third for small-scale residential land and two thirds for general residential land. The tax notice combines fixed asset tax and city planning tax on one sheet, so look at the total of both.
In brief, the residential land special rule reduces the tax base as follows. Small-scale residential land (up to 200 square metres per dwelling): fixed asset tax on one sixth of the valuation, city planning tax on one third. General residential land (the portion over 200 square metres): fixed asset tax on one third, city planning tax on two thirds. Non-residential land (vacant land, shops, car parks and so on): no special rule for either tax, with the burden adjustment generally capping the base at 70% of the valuation. Land that has received a recommendation as a specified vacant house or a poorly managed vacant house: the special rule falls away for both taxes.
What "sixfold" means is that this special rule falls away. Demolish the house and leave the land vacant, and on the following 1 January it is no longer residential land; the tax base returns from one sixth to the full amount. On paper, the fixed asset tax on the land can rise by up to six times. In practice, though, the increase is usually smaller. Two reasons. First, vacant (non-residential) land has a burden adjustment measure, and the tax base is generally capped at 70% of the valuation, so the figure is often around four times rather than six. Second, demolishing the house removes the fixed asset tax on the building, so the increase in the total for land and building is smaller still. If the old building's valuation is low, the effect is small, but it is not zero. "Sixfold" is the theoretical ceiling looking at the land alone; looking at the total on the notice, "about three to four times" is the number I usually see in practice.
As a rough picture for a 180 square metre lot valued at 18,000,000 yen with an old house valued at 1,000,000 yen (fixed asset tax at 1.4% only): with the old house, land 42,000 yen plus building 14,000 yen, a total of 56,000 yen (land 18,000,000 × 1/6 × 1.4% = 42,000 yen; building 1,000,000 × 1.4% = 14,000 yen). As vacant land, about 176,000 yen (18,000,000 × 70% × 1.4%). Roughly 3.1 times in total. City planning tax is separate.
The other situation in which the special rule falls away is a neglected vacant house. Under the 2015 Act on Special Measures for Promoting Countermeasures against Vacant Houses, when a municipality issues a recommendation on a "specified vacant house" (特定空家) that is at risk of collapse or the like, the residential land special rule is removed. With the amendment of December 2023, a "poorly managed vacant house" (管理不全空家, one that is at risk of becoming a specified vacant house if left alone) also loses the special rule once a recommendation is issued. In other words, "keep the house standing and the tax stays low" now applies only to a house that is being maintained. The "cost of neglect" described in another article on this site has clearly risen on the tax side too.
The 1 January assessment date can be used in practice. For example, if you demolish the house in December, the special rule falls away from the next year's tax; if you demolish it on or after 2 January, that year's tax remains at the residential land rate. Conversely, if you hold vacant land and plan to build a house, the special rule applies from that year if the building is complete (strictly, in a state recognised as a dwelling) by 1 January. For a vacant house you plan to sell, selling it with the old house in place and letting the buyer demolish, or demolishing after 1 January has passed, can be more favourable tax-wise than demolishing first and then selling.
Let me calculate with the figures on the notice. The current tax. Land valued at 18,000,000 yen; all 180 square metres are small-scale residential land (200 square metres or less), so the tax base is one sixth, 3,000,000 yen, and fixed asset tax at 1.4% is 42,000 yen. City planning tax is 0.3% of one third, 6,000,000 yen, so 18,000 yen. The building, valued at 1,000,000 yen, is 14,000 yen at 1.4% and 3,000 yen at 0.3% city planning tax. Total 77,000 yen. The man's notice was slightly lower because of the burden adjustment, about 63,000 yen.
After demolition. The special rule on the land falls away, and the tax base is 70% of the 18,000,000 yen valuation (the cap under the burden adjustment), 12,600,000 yen. Fixed asset tax at 1.4% is 176,400 yen, city planning tax at 0.3% is 37,800 yen. The building is gone, so zero. Total about 214,000 yen. About 3.4 times the current 63,000 yen. "Sixfold" is the theoretical figure for the fixed asset tax on the land alone, without the burden adjustment, going from one sixth back to one; on the total of the notice it is three to four times, which is the practical figure given above. For this house it was 3.4 times.
We also decided on timing there and then. The man intended to sell the family home, and the demolition was because the agent had told him "vacant land is easier to sell." In this area, however, selling with the old house and having the buyer demolish is also normal, in which case the demolition cost (wooden two-storey house, about 1,400,000 yen) is borne by the buyer or built into the price. The man had planned to demolish in December, but if he demolished after 1 January, the next year's tax would stay at the residential land rate. If the sale was expected the following spring, demolishing on or after 2 January and selling as vacant land in spring would mean no year in which he paid the vacant-land tax of 214,000 yen. Had he demolished in December, the difference would have been about 150,000 yen for one year.
Finally, revaluation. Fixed asset tax valuations are reviewed every three years (most recently fiscal 2024, next fiscal 2027) and in principle held unchanged in between. For land, the guide is 70% of the official land price, so in areas where land prices are rising, the tax rises in a revaluation year. The burden adjustment measure restrains sudden rises, so it does not jump all at once, but look at the tax base column of the notice in a revaluation year.
The man who asked "380,000 yen, isn't it?" got an answer of about 214,000 yen, and moreover, by demolishing on or after 2 January, there was no year in which he paid that 214,000 yen. I wrote at the start that it is "half right and half wrong." What is right is that the special rule falls away. What is wrong is the number six, and the assumption that you cannot choose when it falls away. The tax notice, and the date 1 January. With those two, 380,000 yen became zero.
Written by: 長澤 湊（licensed real-estate transaction specialist, administrative scrivener, assistant surveyor） Content checked on: 2026-10-14
This article is a general explanation of Japanese rules and procedures, not advice on an individual case. Figures and rules are as of the date shown. For your own situation, consult a lawyer, judicial scrivener, tax accountant or administrative scrivener in Japan.