This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
Two ways of having your employer cover 100,000 yen of rent are taxed very differently. A housing allowance paid in cash is taxed in full as salary, while company-leased housing, where the company signs the lease and rents the home to you, is taxed only in part. A 100,000 yen housing allowance loses more than 30% to tax and social insurance, leaving about 65,000 yen. With company-leased housing your own share can be a few thousand yen to somewhere in the ten thousands a month, and the gap in take-home pay can exceed 300,000 yen a year. At the centre of it is the National Tax Agency's formula for the deemed rent (賃貸料相当額), which is built from the property tax assessment base. This article sorts out the different rules for employees and directors, the fact that the lease has to be in the company's name, and the change on 1 October 2026, when the in-kind remuneration values used for social insurance move from a per-tatami-mat basis to a per-square-metre basis and rise in Tokyo, using National Tax Agency and Japan Pension Service materials.
The short answer: a 100,000 yen housing allowance versus company housing is about 350,000 yen a year in take-home pay
| Housing allowance of 100,000 yen (cash) | Company-leased housing (the company signs a 100,000 yen lease) | |
|---|---|---|
| What the company pays | 100,000 yen a month | 100,000 yen rent less 5,300 yen from the employee = 94,700 yen a month |
| Amount taxed as salary | The whole 100,000 yen | 0 yen (the employee pays at least 50% of the 10,600 yen deemed rent) |
| Tax and social insurance the employee pays (about 35%) | About 35,000 yen a month | 0 yen |
| Rent the employee pays | 100,000 yen (out of the allowance) | 5,300 yen |
| Out of the employee's pocket (on a take-home basis) | 35,000 yen a month (65,000 yen allowance less 100,000 yen rent) | 5,300 yen a month |
| Difference (a year) | About 356,000 yen in favour of company housing | |
Note: the deemed rent of 10,600 yen assumes a building with a property tax assessment base of 3 million yen, a floor area of 50 square metres and a share of the land with an assessment base of 2 million yen. Tax and social insurance are a rough figure for an employee in the 10% bracket (10.21% income tax plus 10% resident tax plus about 15% social insurance). Because company housing lowers the standard monthly remuneration, the future employees' pension is slightly smaller.
The National Tax Agency states that "a housing allowance paid in cash, or rent covered where the occupant has signed the lease directly" does not count as providing company housing and is taxed as salary, and that for company housing only "the difference between the deemed rent and the rent actually collected" is taxable[National Tax Agency, No.2597 Lending company housing to an employee].
Working out the deemed rent: add three figures based on the property tax assessment base
For company housing lent to an employee (an ordinary member of staff), the deemed rent is the total of the three items below, whether the company owns the home or leases it[National Tax Agency, No.2597].
1. The building's property tax assessment base for the year x 0.2%
2. 12 yen x the building's total floor area (square metres) / 3.3 square metres
3. The land's property tax assessment base for the year x 0.22%
Example: 3 million yen x 0.2% = 6,000 yen; 12 yen x 50 square metres / 3.3 = 182 yen; 2 million yen x 0.22% = 4,400 yen, for a total of 10,582 yen
The point is that the deemed rent is calculated from the assessment base, a low figure, and has nothing to do with the actual rent. Even for a home renting at 100,000 yen, the deemed rent is usually somewhere around 10,000 yen. In the National Tax Agency's example, where the deemed rent is 10,000 yen and the employee pays 6,000 yen, the 4,000 yen difference is not taxed, because the employee pays at least 50%. If the employee paid 3,000 yen, the 7,000 yen difference would be taxed as salary.
The National Tax Agency says it is "necessary to confirm the property tax assessment base and similar figures with the lessor". If the landlord will not tell you, the company, as the tenant on the lease for company-leased housing, counts as a "person holding a leasehold right over the building" and can inspect the property tax register or request an assessment certificate at the municipal office (Local Tax Act, Article 382-2). Even when the assessment base is revised, an employee's company housing does not need to be recalculated as long as the change is within 20%[National Tax Agency, Q&A examples].
Directors get no "50% rule", and the formula depends on whether the home is small-scale
Company housing for directors is covered separately in Tax Answer No.2600[National Tax Agency, No.2600 Lending company housing to a director].
| Employee | Director | |
|---|---|---|
| Formula for the deemed rent | The three items above (the same whatever the floor area) | The same three items for small-scale housing (99 square metres or less for a building with a useful life over 30 years, 132 square metres or less for 30 years or under). Otherwise, one twelfth of the building's assessment base x 12% (10% over 30 years) plus the land x 6% |
| Where the company leases the home | Still the three items | Where it is not small-scale housing, the higher of "50% of the rent the company pays" and the formula above |
| If the occupant pays at least 50% of the deemed rent | The difference is not taxed | No such rule. The whole difference from the deemed rent is taxed as salary |
| Luxury company housing (over 240 square metres and the like) | — | The deemed rent is the amount that would normally be payable to use the home |
A director is not taxed if he or she pays the full deemed rent. For small-scale housing the deemed rent uses the same formula as for employees and comes to around 10,000 yen, so cutting the director's remuneration and providing company housing instead reduces the income tax, resident tax and social insurance on that remuneration all at once. How to set director's remuneration is covered in what is the best level for director's remuneration.
What it takes: the lease in the company's name, the rent paid by the company to the landlord
- Make the company the tenant on the lease. A lease in the employee's own name with the company subsidising the rent counts as "rent covered where the occupant has signed the lease directly", and the whole amount is taxed as salary. A home you already live in can become company housing if the lease is switched to the company's name.
- The company pays the landlord, and a company housing charge is deducted from the employee's pay. Collect at least 50% of the deemed rent from an employee, and the full amount from a director.
- Write a company housing rulebook. Setting out who is eligible, how much the occupant pays and what happens on move-out makes it easier to explain during a tax audit.
- Management and common-area fees may be included in the rent for the calculation. Where the home comes furnished, the furniture is valued separately[National Tax Agency, Q&A examples].
Social insurance uses a different calculation. From 1 October 2026 Tokyo moves from 2,830 yen a tatami mat to 1,330 yen a square metre
Separately from the deemed rent used for tax, social insurance values company housing as in-kind remuneration at a rate set for each prefecture and adds it to the standard monthly remuneration. That rate and the method of calculation change on 1 October 2026[Japan Pension Service, table of in-kind remuneration values for fiscal 2026].
| Until 30 September 2026 | From 1 October 2026 | |
|---|---|---|
| Unit (Tokyo) | 2,830 yen per tatami mat of living space | 1,330 yen per square metre of total area |
| Area counted | Living space only, such as the living room and bedrooms (the entrance, kitchen, toilet, bathroom and corridors are excluded) | The total floor area of the home (a detached storeroom or garage and common areas are excluded) |
| The Japan Pension Service's example (16 mats of living space, 40 square metres in total) | 26.4 square metres / 1.65 x 2,830 yen = 45,280 yen | 40 square metres x 1,330 yen = 53,200 yen |
| Where rent is collected from the occupant | The amount collected is deducted from the in-kind remuneration value, and the remainder counts as remuneration | |
In that example the same home adds 7,920 yen a month more to remuneration. After deducting the 5,300 yen paid by the occupant, 47,900 yen is added to the standard monthly remuneration, so someone living in company housing may move up a grade in social insurance. The change counts as a "change in fixed wages", and a move of two grades or more triggers an interim revision. For how the grades work, see how to look up your standard monthly remuneration, and for the amounts, see how much social insurance costs by annual income.
Even so, company housing still adds less to remuneration than a housing allowance does (47,900 yen in kind against a 100,000 yen allowance), so the combined burden of tax and social insurance is lighter.
Three drawbacks: a smaller pension, losing the home when you leave, and paperwork for the company
- A lower standard monthly remuneration means a smaller future employees' pension and smaller sickness and maternity allowances. Swapping a 100,000 yen housing allowance for company housing cuts remuneration by 100,000 yen and adds 47,900 yen of in-kind remuneration, a net drop of about 50,000 yen in grade terms. Over 40 years the employees' pension is about 33,000 yen a year lower.
- The right to the home ends when you leave the company. The lease is in the company's name, so on leaving you either sign a new lease in your own name or move out.
- It is more work for the company. The lease, the rent payments, checking the assessment base and drawing up a company housing rulebook all have to be handled. In smaller companies it often goes unused simply because "a housing allowance is easier".
Even so, social insurance falls for both the employee and the company, so for the same total labour cost company housing leaves the employee with more take-home pay. The tax on renting out your own home when you are transferred is covered separately in filing a tax return on rental income.
Frequently asked questions
Can I rent my own home to my company and take it back as company housing?
Renting your own home to your company and having the company lend it back to you as company housing is possible in theory, but the rent you receive from the company becomes your real estate income, and the arrangement may be questioned as lacking a business rationale. Consult a tax accountant before going ahead.
Summary
- A ¥100,000 housing allowance is taxed in full, but with company-leased housing, only a portion is taxed. The difference in take-home pay is about ¥350,000 a year.
- The "deemed rent" amount is calculated from the fixed asset tax assessment value, and typically comes to around ¥10,000 even for a ¥100,000-a-month apartment.
- For regular employees, if they pay 50% or more of the deemed rent, the remaining difference is tax-free. This special treatment does not apply to company executives.
- To use this scheme, the lease must be in the company's name, with the company paying rent directly to the landlord.
- From October 1, 2026, the deemed value of in-kind benefits for social insurance purposes in Tokyo changed from ¥2,830 per tatami mat to ¥1,330 per square metre.
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Reference links (sources)
This article is based on the materials below. Introducing company housing requires work rules and a company housing rulebook, so those responsible at the company should consult a tax accountant and a labour and social security attorney.
Note: this article is general information. The worked examples use assumed figures, and the actual deemed rent depends on the assessment base of the property.