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Taiwanese Capital Gains Tax Change Uncertain

by Mary Swire,, Hong Kong

09 December 2014

Following the defeat of the ruling Kuomintang party in Taiwan's recent local government elections, and the Cabinet's subsequent resignation, it appears that the capital gains tax (CGT) on share trading, which was due to be imposed on January 1, 2015, will be delayed or even cancelled.

The impending CGT on share trading, which has been criticized as it may dampen trading, is part of Government efforts to enlarge the tax base and find additional tax revenues.

In addition to the existing transaction tax of 0.3 percent on all stock market trades, there would be a 15 percent tax on the capital gains of large traders, defined as those who sell shares worth over TWD1bn (USD32m) in a year. On the other hand, such traders would be able to choose, instead, to be subject to a 0.1 percent tax on their share trades in excess of TWD1bn.

However, following the elections, the Legislative Yuan has delayed a planned review of the new tax arrangements, and the Ministry of Finance has said that its effect on Taiwan's stock market warrants further examination, before it can be implemented.

There have been suggestions that, while it may finally be concluded that the CGT should be completely repealed, there has also been a proposal to increase the trading threshold for the tax from TWD1bn to TWD5bn.

Another casualty of the election defeat could be a proposal to change the taxation of capital gains on property transactions in Taiwan so that they would be calculated on the basis of actual land and buildings market prices. At present, values used to calculate land value increment tax liability are based on the assessed value of the land alone, as determined by local authorities, which are said to be far below actual values.

TAGS: capital gains tax (CGT) | Finance | tax | investment | business | property tax | financial services | real-estate | equity investment | Taiwan | tax thresholds | stock exchanges | trade | services

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