The Cabinet yesterday gave the green light to amending the Land Law (土地法) to allow the Land Value Incremental Tax rate to be reduced in a bid to spur the dormant real estate market.
Calculation of the tax -- levied on the sale of all land -- is based on the increase in the government assessed value of the land, adjusted for inflation as measured by the consumer price index (CPI).
The amount of the tax depends on how much the government assessed value increased during the period of ownership.
The tax rate has already been reduced once. The government halved the tax for a two-year period that began in February last year. That tax break is scheduled to end by the end of next January and the Ministry of Finance announced earlier this year that it wanted to amend the law make the reduction permanent.
"The 50 percent discount has been successful in increasing transaction volume [in the property sector]," said Tony Chao (趙正義), national director of capital markets at Jones Lang LaSalle Taiwan (仲量聯行).
"Developers and land owners took advantage of the discount and we expect more transactions in the lead up to the [scheduled] end of the 50 percent discount," he said.
It would be good to see the tax rates permanently lowered, Chao said, since many homeowners have not yet benefited from the tax reduction.
Reducing the land-value tax allows sellers to sell properties at a lower cost, while giving buyers more bargaining power, said Lai Cheng-i (賴正鎰), chairman of the Taiwan Construction Development Federation (台灣省建築開發公會) in Taichung.
The Cabinet passed the amendment to lower the land value incremental taxes during its regular closed-door weekly meeting yesterday morning. The amendment will now be submitted to the Legislative Yuan for approval.
If lawmakers pass the amendment the current tax levels of 60 percent, 50 percent and 40 percent would be reduced to 40 percent, 30 percent and 20 percent, respectively.
Chao said the proposed rates are a very good discount over the old rates, and this will help maintain the markets momentum.
"Policy consistency is also very important for the real estate industry so we are keen to see the new rules confirmed," he said.
According to a statement by the ministry, the implementation of the reduced tax rates between February last year and January this year helped increase the number of transaction by 90,000, or 40 percent, to 330,000 from a year ago.
The land-value tax revenues generated from those transactions grew by NT$50.2 billion, or 26 percent, compared to revenues from the previous year, the ministry said.
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