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Taiwan Approves Massive Property Tax Hike

by Mary Swire,, Hong Kong

05 June 2015

Taiwan's legislature has approved government plans to introduce a new capital gains tax with a top rate of 45 percent to curb property market speculation and surging real estate prices.

Under the proposals approved by the Legislative Yuan on June 5, a 45 percent capital gains tax will be levied on the proceeds from any property sale that occurs within one year of purchase. Properties held for longer periods before being sold will be subject to lower taxes as follows: 35 percent if the property was held for a period of between one and two years; 20 percent if held for between two and 10 years; and 15 percent if held for more than 10 years.

Non-resident individuals and companies will also be subject to the 45 percent tax if selling a property within one year of purchase, after which they would pay 35 percent tax on real estate gains regardless of the length of the holding period.

Tax relief will be made available to homeowners who occupy their residences for at least six years.

The new tax is significantly higher than the current luxury tax, under which the owner of a property suffers a 15 percent tax if the property is sold within one year of its purchase, falling to 10 percent if sold during the second year. However, that tax is based on the sale price rather than the capital gain. The luxury tax would be canceled with the introduction of the new tax.

Capital gains will be calculated on the basis of actual land and building market prices, instead of the assessed value determined by local authorities.

The capital gains tax will apply to properties purchased from January 1, 2016. Until then, existing rules will continue to apply.

The Government forecasts that the new tax will raise TWD4.2bn (USD136m) in its first year of operation, rising to TWD28bn in its tenth year.

TAGS: individuals | tax | investment | business | real-estate investment | speculation | real-estate | luxury tax | Taiwan | Tax

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