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Taiwan Announces Property Tax Reforms

by Mary Swire, Tax-News,com Hong Kong

17 February 2015

While its details are still being worked out, the Ministry of Finance has disclosed a tax reform plan that would consolidate housing and land taxes in Taiwan and also impose a much higher rate on foreign individuals or companies with real estate in the country.

The Government has insisted that the objective of the proposed unified tax is not to raise additional revenue, but to discourage speculation in higher priced properties and put Taiwan's property taxes in line with international norms.

Capital gains will therefore be calculated on the basis of actual land and building market prices, instead of the assessed value determined by local authorities, which are often below actual values, as is currently the case for the land value increment tax.

In addition, to discourage speculative activity by foreign property buyers, it is also proposed that foreigners with real estate in Taiwan will pay a flat tax rate of 30 percent. Local residents will pay only 17 percent tax, as long as they sell property two years or more after its purchase.

That tax rate would be significantly higher than the current luxury tax, under which the owner of a property suffers a 15 percent tax on its sale price if it is sold within one year of its purchase, falling to 10 percent if sold during the second year. The luxury tax would be cancelled with the introduction of the new unified tax.

There would be exclusions available for primary individual residences and agricultural land, as under the luxury tax.

Draft legislation is expected to be introduced into Parliament shortly, with the intention that the new tax regime should become effective next year.

TAGS: individuals | tax | investment | business | real-estate investment | property tax | speculation | real-estate | luxury tax | Taiwan | ministry of finance | tax reform

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