Value added for property value tax, based on prices estimated by the government, could be deducted when calculating capital gains under legislation prior to the amendment. However, under the new law, the eligible value added is limited to the amount incurred since the last transfer of ownership and not to the full amount additional since the completion of the construction of the property. Under the new legislation, the calculation of the «real estate wealth» threshold may differ from the calculation under an applicable tax treaty. Instead of using the net asset value of financial statements to determine the value of the business, tax treaties generally use the full value of assets without taking into account debts or other liabilities to determine whether a corporation`s shares are «rich in real estate,» and therefore further analysis would be required if the taxpayer`s country of residence has a tax treaty with Taiwan. Net assets, after applicable exclusions, deductions and exemptions, are subject to the following progressive tax rate: If the shares are «real estate rich,» regardless of whether the shares are from a foreign company or a Taiwanese company, the resulting gain would be reclassified as a capital gain from the transfer of real estate and the graduated rates under the new law would apply as of July 1, 2021. In other words, the new law also applies to the indirect transfer of foreign or Taiwanese shares as a result of a transfer of shares of a foreign company, provided that the transferred shares are rich in ownership. The new Act revised the current Capital Gains Tax Act with respect to the transfer of real property by: (1) increasing graduated tax rates; (2) the extension of the scope of taxation; and (3) the reduction of deductions in computing capital gains. Capital gains tax on the transfer of real estate in Taiwan is taxed at graduated rates that are subject to different holding periods as described below. Prior to the new law, profits from the transfer of shares in a foreign company were subject to capital gains tax on the transfer of real estate if the value of the transferred shares consisted mainly of Taiwanese real estate (i.e. if more than 50 % of the value of the shares or share capital of the company concerned included Taiwanese real estate, The shares were «rich in real estate»). Such a gain on the transfer would be reclassified as a capital gain on the transfer of real property and not as a transfer of qualified securities, and graduated tax rates would apply.
Based on the supplementary guidance published on June 30, 2021, the value of the shares and share capital will be determined on the basis of the net asset value of the Company`s financial statements. Taiwan amends the Capital Gains Tax Law on Real Estate Transfers Under the new law, transfers of condominiums/pre-sold homes (with or without land) by companies will be treated as real estate transfers, and the resulting capital gains will be subject to the graduated rates listed above (prior to the new law, such a transfer was not a taxable event). Costs relevant to the acquisition of the condominium/pre-sold homes may be deducted from the transaction amount when calculating the amount of capital gains tax. To calm real estate speculation that has driven up the cost of living in Taipei City and other urban areas, the government of the Republic of China introduced a new luxury tax in June 2011. The law imposes a 15% sales tax on owners of second homes who sell within one year of purchase. In addition, a 10% sales tax is levied on properties sold after one to two years of ownership. [12] Data provided by the Government of the Republic of China at the end of 2011 showed that the luxury tax had the desired effect, causing the average price of real estate in Taipei to fall by almost 12%, while the total volume of real estate transactions on the island was reduced by almost 15% between June and October. [13] Multinational companies with real estate in Taiwan should consider the impact of the new law on possible transfers of real estate, including restructuring.
Lawmakers from all parties yesterday agreed July 1 as the tentative date for a draft amendment to the Income Tax Law (所得稅法) to curb real estate speculation. The law, which aims to curb real estate speculation, was passed after lawmakers resolved points of disagreement in bipartisan negotiations Wednesday, including setting July 1 for the changes to take effect. The Taiwanese Legislative Yuan1 adopted an amendment to the current Capital Gains Tax Law regarding the transfer of real estate (new law). The new law will come into force on July 1, 2021 and will apply specifically to the transfer of real estate acquired on or after January 1, 2016.
