The legislature yesterday passed amendments to the Income Tax Act (所得稅法) that combine the separate taxations on house and land sales as part of an overhaul of the nation’s property tax system.
Legislators across party lines called it “a significant step toward residential justice.”
On Jan. 1 next year, the amended law will levy heavy taxes on capital gains procured by short-term property speculators from property sales.
Photo: CNA
The new combined tax is graded in respect to the length of time one owns real estate, with the highest rate of 45 percent imposed on gains obtained from properties held for less than a year. Income from the sale of properties held for more than a year, but less than two years, will be taxed at 35 percent; for more than two years, but less than 10 years, 20 percent; and more than 10 years, 15 percent.
The amount applicable for tax exemption has been set at NT$4 million (US$128,899) for capital gains from the sale of residences that legally qualify as “self-use,” with the additional surplus being taxed at 10 percent.
“Exemption” clauses have been added to exclude those who have sold their properties “involuntarily” within two years of purchase (such as due to job relocation or leaving a job), and those who have built houses on land they own in cooperation with business entities (and completed the building and selling of the house within two years) so that they will be subject to the normal tax rate of 20 percent.
The levies required by the Specifically Selected Goods and Services Tax Act (特種貨物及勞務稅條例), or the so-called “luxury tax,” will be removed in January when the new property law takes effect.
The amended law also allows tax revenue from the category to be used for long-term care services and residential policies after the necessary deduction has been made for the central government.
Democratic Progressive Party Legislator Chen Chieh-ju (陳節如) said there were some compromises made, such as a high tax exemption amount and the fact that the amendment does not apply retroactively.
“However, while this amendment is only a humble step to extend the basic logic of ‘income tax’ to that gained from property sales, its significance lies in its reflection of the widespread antagonism against the short-term property speculation that has caused the surge in housing prices, the gains of which have been exempt from taxation,” she said.
Chinese Nationalist Party (KMT) Legislator Lai Shyh-bao (賴士葆) said Taiwan has probably been the only country to keep taxation on land and houses separate, which has incurred criticism.
“This is the greatest amendment in Taiwan’s legislative history,” Lai said.
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