Thu, May 14, 2015 page13

• Cabinet passes draft property sales tax

  INTEGRATED LEVY: The proposal sets different taxation rates based on length of ownership. Analysts said it could be another blow to a sluggish property market

  • By Crystal Hsu / Staff reporter
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  The Cabinet yesterday approved a draft integrated house and land sales tax with a maximum rate of 45 percent, as part of the government’s move to create a more rational taxation system and curb property speculation.

  The latest proposal, which the Cabinet hopes will take effect next year after approval by the legislature, could pour cold water on an already-sluggish market, industry insiders said.

  The draft plan now seeks to impose an income tax rate of between 15 percent and 45 percent on gains from selling houses or land depending on the duration of ownership.

  Houses sold within one year of purchase would be subject to a tax rate of 45 percent of the trading gain, with the rate easing to 35 percent for houses owned for two years, 20 percent for 10 years and 15 percent for ownership in excess of a decade, according to the proposal.

  “The tax scheme is more reasonable as it sets different rates for different lengths of ownership,” said National Development Council Minister Woody Duh (杜紫軍), who is responsible for coordinating intra-ministerial discussions of the issue.

  The proposal would also offer a tax break of NT$4 million (US$129,954) on gains from sales of homes that have been self-occupied for more than six years.

  It is more stringent than the Ministry of Finance’s proposal that such homes be spared the tax if they are sold for NT$40 million or less.

  Gains in excess of NT$4 million would be subject to a 10 percent income tax, the proposal says, adding that the tax credit extends to transactions stemming from relocation needs.

  The tax rate is a flat 17 percent for companies, but 45 percent for foreign firms if the property is sold within one year of purchase and 35 percent for longer ownership, the proposal said.

  The tax scheme could generate an additional NT$4 billion in tax revenue in the first year, with 8,400 houses likely to be affected, Duh said.

  The figure is expected to climb to NT$10 billion in the following years, he said, adding that the proceeds would go to support home purchases by young people and long-term healthcare.

  The special sales levy, better known as the luxury tax, will be retired once the integrated house and land sales tax go into effect next year.

  The proposal would cover houses sold from January last year if the property was owned for less than two years.

  The Cabinet plans to submit the draft proposal to the legislature after holding public hearings nationwide and making revisions, if necessary, Duh said.

  The more stringent tax terms could be a further drag on the market, with transactions already dropping 20 percent so far this year.

  “The proposed 45 percent tax rate would make Taiwan the most unfriendly in terms of property taxation,” Taiwan Realty Co (台灣房屋) said, compared with 30 percent in Malaysia and Japan and 40 percent in Australia and the US.

  Evertrust Rehouse Co (永慶房屋) expects selling pressure to build up toward the end of the year, as investors may want to cash out to avoid the levy.

  “Sellers may be willing to show greater pricing flexibility, therefore facilitating transactions,” Evertrust researcher Andy Huang (黃舒衛) said.

  Sinyi Realty Inc (信義房屋) is less pessimistic, saying existing homeowners can breathe a sigh of relief as the tax proposal will only affect houses sold beginning next year.

  “The clearer the tax plan, the better the market can adjust and start to recover,” Sinyi researcher Tseng Chin-der (曾進德) said.
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