TAIPEI: Taiwan’s Ministry of Finance announced a proposal to consolidate housing and property taxes here the other day to prevent foreign speculation on the property market.
Foreign nationals and corporations buying real estate in Taiwan will have to pay a single tax rate of 30%, higher than the 17% imposed on locals.
Premier Mao Chi-kuo is said to have approved the main tenets of the finance ministry’s proposal, but pushed for more flexibility, especially in terms of the sunrise clause under which the ministry proposed that the new tax rate would only apply to property acquired before June 1, 2011, when the luxury tax, which imposes a 15% sales tax on the owners of second homes if they sell within a year and 10% on those who sell within two years, came into effect. There was a range of different opinions on this clause in discussions at the Legislature on Tuesday, so Mao suggested that it be left for lawmakers to negotiate.
The finance minister, Chang Sheng-ford, aims to introduce a draft bill in the new session of the legislature after the Lunar New Year and hopes it can be approved within the session and go into effect in 2016.
Threshold set at NT$40 million
The finance ministry has relaxed restrictions for owners of multiple houses when selling the house in which they live as they will now be exempt from tax if the property is sold for less than NT$40 million (US$1.3 million).
To counter the rise in house prices, the Central Bank of the Republic of China (Taiwan) again reduced the availability of mortgages for high-priced properties, defining “high-priced” properties as those priced over NT$70 million (US$2.2 million) in Taipei, NT$60 million (US$1.9 million) in New Taipei and NT$40 million in other areas. The ministry has proposed NT$40 million as the threshold for tax exemption nationwide, which suggests quite a limited scope of taxation.
When asked if the 30% single tax rate, aimed at reducing foreign speculation on Taiwan’s property market, would be subject to a reduction if the property was held by the owner long-term, the ministry replied that the proposal is still in its initial stages and that this is still to be discussed.
In terms of the definition of a property that one lives in, this is defined as the home of either oneself, one’s spouse or one’s non-adult children; one has to have had one’s household registration there for at least six years; for the five years before selling, it should not have been rented to tenants or have been a place of business and the seller has to have owned the house for six years before selling.
After the consolidated housing and property taxes goes into effect, even those property owners who don’t meet the conditions for having “lived in the property” will still benefit from the tax rebates on reselling the property.
The ministry has also adopted the suggestion of social movements protesting the rise of house prices, raising the tax rate to 30% for those who sell a property within two years of buying it, to reduce speculation on the market, but this does not apply if the seller lives in the property in questio
