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June 24, 2017

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Amendment to luxury tax clears Legislative Yuan vote

TAIPEI, Taiwan -- An amendment to the luxury tax cleared the Legislative Yuan yesterday, allowing the Ministry of Finance to evaluate real estate transactions individually in order to prevent the tax from being levied on those who are not engaged in short-term speculative investment.

An amendment to the Specifically Selected Goods and Services Tax Act, or the co-called "luxury tax," was passed by the Legislature's Finance Committee.

Under the current luxury tax, if a property acquired not for personal use is sold within two years of its purchase, a tax rate of 10-15 percent will be levied on the sales price.

The Finance Committee recognized that transactions vary case by case, and it is difficult for the government to categorize one type of transaction as speculative short-term investment. As such, the committee added a clause which allows some transactions to be exempted from the luxury tax at the Ministry of Finance's discretion, with the aim of avoiding taxing "the innocent" who are not engaged in speculative investments.

In addition, a clause was added to ensure that those who purchase properties for personal use are not to be levied with the luxury tax. Another clause was added so that a luxury tax may be levied on real estate located in areas zoned for industrial use.

In order to prevent the Ministry of Finance from abusing its discretionary power, the Finance Committee requested that the ministry provide adequate rationale for any tax exemption approved.

Finance Minister Chang Sheng-ford (張盛和) said yesterday that after the implementation of the luxury tax 2.5 years ago, prices of some "fake" upscale apartments in the Greater Taipei area have fallen 30 to 40 percent.

Chang termed properties that are not situated in prime locations or lack views as fake upscale apartment. With transaction prices going down, Chang said that local housing prices have become more "stable," and transaction volumes have dropped.

The luxury tax's effects have been positive, and as such, it must not be repealed and requires amendment only, Chang said, adding that the goal is to make Taiwan's housing prices reasonable, without causing a "hard landing" for Taiwan's real estate market. The goal of the luxury tax is to maintain taxation justice, Chang stressed.

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