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Latest Legal Development on PRC Citizens’ Purchasing Real Estate in Taiwan
On 26 November 2013, the Ministry of the Interior (MOI) promulgated a ruling (Ref. No. Tai-Nei-Di-Zi-1020351411) stating that the gross volume control, a new restriction, on real estate purchased by the citizens of the People's Republic of China (PRC) in Taiwan, will be adopted from 1 January 2014. In fact, the newly-adopted gross volume control are not the only regulatory restrictions on PRC citizens with regard to the purchase of real estate in Taiwan; on 8 August 2002, the Taiwan government promulgated the “Regulations on Permit for the PRC Citizens to Acquire, Set or Transfer the Property Rights of Real Estates” (the “Regulations”) to review the applications relating to PRC citizens’ purchase of real estate in Taiwan.
The Regulations were enacted pursuant to Article 69 of the “Act Governing Relations between the People of the Taiwan Area and the Mainland Area” (the “Act”) and have undergone two amendments. Currently there are 20 Articles included in the Regulations. We hereby summarize the regulatory restrictions set forth in the Regulations and relevant laws in the following 6 categories:
1. Restrictions on Qualifications
According to Article 4 of the Regulations, PRC citizens, PRC-funded companies recognized under the Company Act, or the juristic entity, association, or other institution recognized under the Act (collectively, "PRC People") may acquire real estate in Taiwan. However, any PRC citizen holding a position or is a member of a political party, or military, administrative or political institution in the PRC is ineligible to acquire real estate in Taiwan.
The term "PRC citizen" refers to a natural person who has a household registration in the PRC according to Paragraph 4, Article 2 of the Act. In addition, Article 3 of the Act states that a PRC citizen residing beyond the PRC jurisdiction shall remain subject to the Act as well. Hence, the restrictions set forth in the Regulations will apply to those PRC citizens residing, visiting, or getting married in Taiwan.
2. Restrictions on the Purposes of Use
According to Article 6-1 of the Regulations, a PRC citizen may only acquire ownership of the real estate for the purpose of "residence." In addition, according to Articles 7 and 9 of the Regulations, the juristic entity, association, other institution, and PRC-funded company, engaging in investment in favor of the overall economic development or agricultural and animal husbandry industries in Taiwan or for the purpose of "business needs," may acquire real estate in Taiwan.
The term "business needs" refers to dwellings required for the residence of the personnel or the plants or business offices purchased for the business operations. Te term "the investment of overall economic development," means "to develop or manage the investment in Taiwan with respect to tourism, industrial business, or other permissible investments announced by the central government authorities." The term "investment of agricultural and animal husbandry industries" refers to the investment corresponding to the technical-intensive and capital-intensive standards and categorization for agricultural industries specified and announced by the Council of Agriculture, Executive Yuan.
3. Restrictions on Transfer of Property Right
According to Article 6-1 of the Regulations, the PRC citizens, who have acquired real estate in Taiwan, are not allowed to transfer their ownership within three years of the date of registration (excluding transfers as a result of succession, compulsory enforcement, expropriation, or a court judgment).
4. Restrictions on the Visit Period
According to Paragraph 3, Article 12 of the "Regulations Governing Permits for Professional Personnel from the People's Republic of China Engaging in Professional Activities in the Republic of China," there is no restriction on the frequency of entries into Taiwan by the PRC citizens who acquire ownership of real estate in Taiwan; however, the total length of their stay in Taiwan shall not exceed 4 months annually.
5. Restrictions on the Type of Investment
According to a ruling issued by the MOI dated 2 September 2010 (Ref. No. 0900175971), if PRC citizens jointly apply for acquiring, creating encumbrances on, or transferring the property rights of the real estate in Taiwan, it will be difficult for the Taiwan government to have an effective control over this and it may endanger public safety as the number of the people involved would be significant. Besides, in case of a joint purchase, it is apparent that lots of PRC citizens come for purchasing real estate in Taiwan, but the amount of real estate actually acquired is small in reality. The outcome runs contrary to the legislative purpose of the Regulations, i.e., to make use of the funds and technology effectively and to improve the development of land in Taiwan. With the aforementioned ruling, PRC citizens may not be allowed to jointly acquire, create encumbrances on, or transfer real estate in Taiwan.
6. Other Restrictions
Articles 2 and 3 of the Regulations elaborate on the prohibition of PRC acquisition, creating encumbrances on, or transfer real estate in Taiwan, including those applications that may encumber important national construction, involve monopoly or speculation of land, or cover areas prohibiting purchase by the central competent authorities of the target businesses. In addition, the Taiwan government also adopts a series of restrictions on business financing for PRC People regarding purchasing, creating encumbrances on, or transferring real estate in Taiwan.
The restriction of gross volume control promulgated by the MOI specifies that the annual amounts for the land and buildings to be purchased by PRC citizens are 13 hectares and 400, respectively; the remaining portion in a year cannot be incorporated into the quota of the following year. Furthermore, the long-term gross volume control (i.e., the total amounts of real estate PRC citizens may acquire ultimately) on the land and buildings are 1,300 hectares and 20,000, respectively. To determine the above amounts, the area of the land will be calculated according to the total area specified in the applications; the total number of buildings will be calculated according to the total main building lot numbers included in the applications. The MOI is entitled to adjust the abovementioned amounts flexibly from time to time. In principle, the MOI should review the long-term amounts and annul amounts on the gross volume control every half year; the MOI may, after consulting with the relevant authorities, decide to adjust the amounts depending on the actual applications annually whenever necessary. For a special application, the MOI may grant its permission as a special project and may, after consulting with the relevant authorities, determine the amounts individually for the special application. The Department of Land Administration of the MOI also stated that if the number of buildings do not exceed 400 in a year but the area of land meets the ceiling of 13 hectares, PRC citizens are prohibited from continuing purchasing any real estate in Taiwan in the same year; that is to say, when applying the two standards of the gross volume control, the area of land and the number of buildings, the restriction of the area of land shall prevail.
In conclusion, gross volume control is not the first/only regulatory restriction on PRC citizens regarding the purchase of real estate in Taiwan. On the contrary, there are fairly stringent restrictions for them to do so. In other words, the newly-adopted gross volume control just crystallizes the original regulatory restrictions. Furthermore, according to the data published by the MOI with regard to the enforcement of the Regulations, from 8 August 2002 to 30 September 2012, the past 10 years, only 122 applications totaling around NT$1.5 billion were granted to PRC People to purchase real estate in Taiwan, including 114 applications filed by PRC citizens (most of which were purchased by PRC spouses as dwellings covering a small area). After the announcement of the more crystallized restrictions, whether the number of applications or the invested amount in real estate in Taiwan will increase require further observation.