Newsletter
Amendments to the Consolidated Land and Housing Sales Tax Passed by the Legislative Yuan
In order to curb soaring housing prices and improve the disparity between the poor and the rich, the Legislative Yuan passed the bill concerning draft amendments to several provisions of the Income Tax Act and Article 6-1 of the Specifically Selected Goods and Services Tax Act (collectively, "Amendment") on June 5, 2015. The Amendment will take effect on January 1, 2016.
The major points of the Amendment are summarized as follows:
1. Taxable transactions. To protect existing owners of land and houses, the Amendment will only apply to those who buy land and houses on or after January 1, 2016. However, in order to curb rampant speculation in the real estate market, if the land and houses were bought on or after January 2, 2014 and are held for less than 2 years and resold on or after January 2, 2016, the Amendment will still apply.
2. Tax base. The tax base under the Amendment is the remaining balance of the total sales revenue for the land and houses minus/less the cost and expenses and the increase in the amount of the current government-assessed land value (i.e., the difference between the government-assessed land value at the time of the sale and that which was assessed at the time when the land and houses were previously purchased).
3. Tax rates for individuals. In order to encourage the domestic occupants to buy and hold land and houses long term, the tax rates that apply to domestic or overseas occupants are different as shown below:
|
Holding period
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Domestic occupant
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Overseas occupant
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≦1 year
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45%
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45%
|
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> 1 year; ≦2 years
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35%
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35%
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> 2 years; ≦10 years
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20%
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|
|
> 10 years
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15%
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4. Tax rates for profit-seeking enterprises. For an enterprise, having its head office within Taiwan, the tax rate is 17% (the same as the corporate income tax rate). For an enterprise, having its head office outside of Taiwan, the tax rate for the sale of land and houses held for one year or less increases to 45% and that which are held for over one year increases to 35%.
5. Tax deductions and incentives for owner-occupied housing. To provide incentives for people to self-occupy residential property, the sale of land and houses which is the registered residence of an individual, his/her spouse and/or minor children (provided that they live in the house for a period of six consecutive years or longer and have never leased or used the land and house for business purpose) ("Qualified Land and House") will be exempt from the consolidated land and housing sales tax, provided that the tax base is NT$4 million or less. As for the Qualified Land and House for which the tax base is over NT$4 million, the tax rate is only 10%.
It is widely believed that the Amendment regarding the consolidated land and housing sales tax will, to some extent, have an impact on the development of the Taiwan real estate market in the future. However, whether the Amendment will actually suppress soaring housing prices or curb speculation on investment in the Taiwan real estate market remains to be seen.