The Ministry of Finance today is to unveil a watered-down income tax plan on property trading gains, with an overwhelming majority of home owners to qualify for tax exemptions, sources said yesterday.
The Cabinet on Tuesday approved the proposal to impose separate income taxes on property gains after the ministry cut the tax rate to a flat 17 percent, from a range of 5 percent to 45 percent, and raised taxable hurdles for houses sold for NT$40 million (US$1.27 million) or more, the sources said.
Minister of Finance Chang Sheng-ford (張盛和) is scheduled this afternoon to supply details of the tax plan, which is intended to address increasing housing unaffordability and a widening income gap.
About 95 percent of houses have a market value below the threshold, the ministry said, leaving the tax toothless in curbing property speculation.
Houses sold for more than NT$40 million can file for full tax returns after producing relocation documents, local Chinese-language media said, meaning a family can own multiple houses and declare tax returns.
Previously, the ministry set the taxable hurdle at NT$20 million and limited the tax exemption to one home per household.
The 17 percent tax rate is to apply to both individuals and companies, to close loopholes on tax evasion by home owners selling properties using dummy accounts.
Income tax rates could climb to 20 percent and even 30 percent for houses sold within two years of purchase, to discourage property speculation, local media said.
The special sales levy, which subjects houses sold within two years of purchase to up to 15 percent of trading prices, would be retired upon the introduction of the income tax, according to the ministry’s plan.
The ministry plans to submit the draft bill to the legislature after the Lunar New Year holidays in the hope it can win approval in the first half of the year and take effect next year.
Evertrust Rehouse Co (永慶房屋), the nation’s largest broker by number of offices, welcomed the flat tax rate, saying it is simple to follow and would be effective in curbing tax evasion.
The higher tax rates for short-term traders also fall in line with international practices intended to maintain market stability, Evertrust spokesman Andy Huang (黃舒衛) said.
However, Huang voiced reservation about the NT$40 million threshold, as most houses in Taipei cost more, leaving residents of the capital to bear the brunt of the tax reform.
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