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Taiwan's Luxury Tax To Stay

by Mary Swire, Tax-News.com, Hong Kong

10 October 2012


During a parliamentary committee meeting, and following calls for its removal after lower than expected revenue collection, Taiwan’s Finance Minister Chang Sheng-ford has given three conditions for the removal of the country’s luxury tax.

The Special Goods and Services Sales Tax Act, which established Taiwan’s luxury tax targeted at reducing speculative property purchases and a widening wealth gap in the economy, took effect on June 1 last year.

The prime target of the new tax is properties purchased for speculative purposes (rather than as a family home), and then sold on within a short period. The owner of a property suffers a 15% tax on its sale price if it is sold within one year of its purchase, falling to 10%, if sold during the second year.

Some lawmakers are now calling for the tax’s abolition, as the government’s revenue from luxury taxes only reached some TWD5.3bn (USD181m) in the period between its introduction and September 2012, compared with an expected TWD15bn, with a paltry TWD3.5bn having been received from property transactions.

However, in Chang’s opinion, additional revenue was not the reason for the tax having been imposed, and, in any case, the low tax collections have been due to the measure’s success in reducing speculation in the property market. In the period from January to August this year, real estate sales have fallen by 17.2%, compared with the same period in 2011.

While the government has always said that the luxury tax on property was temporary and a stop-gap measure, he disclosed that the government has no current plans for its withdrawal.

He gave three conditions before a removal of the luxury tax on property sales could be contemplated – that the present exemption from the land value increment tax for properties sold within one year of their purchase should be scrapped; that assessed land values for tax purposes should be adjusted closer to actual market values; and that it should be apparent that property market speculation has been eradicated.

A comprehensive report in our Intelligence Report series dealing with the issues raised by international property investment, and the possible taxation implications raised by such purchases, with an account of the likely (and some less obvious) potential countries for your consideration, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report15.asp
TAGS: individuals | Finance | tax | investment | business | real-estate investment | property tax | speculation | law | real-estate | luxury tax | Taiwan | legislation | revenue statistics

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