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September 24, 2017

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Land value increment tax increases 40%

TAIPEI, Taiwan -- The government collected a total of NT$7.6 billion in land value increment tax in August, which was a 40 percent increase from a year ago, the Ministry of Finance (MOF) said yesterday.

The ministry collected a total of NT$67.9 billion in land value increment tax between January and August, which was also a 28 percent and NT$15 billion increase from the same period last year.

This year's land value increment tax revenue is expected to go over NT$100 billion to make a new record, as well as exceeding this year's securities transaction tax revenue.

The land value incremental tax revenue reached NT$70 billion or more in 2006 and 2007, according to the MOF's data. Due to the financial crisis in 2008, the revenue dropped to NT$50 billion in 2008 and 2009. The tax revenue climbed up to NT$73.3 billion in 2010. The tax revenue went up to NT$81.1 billion in 2011, which was NT$9.2 billion more than security transaction tax revenue.

Bestowing Properties as Means of Transfer

Housing transactions usually involve land title transfers, and consequently, land value increment tax is exacted on housing transactions.

The land value increment tax is usually regarded as an important gauge to measure the health of the real estate market. While the number property transactions were low in 2012, the land value increment tax revenue reached NT$8.1 billion. Despite the fact that the tax revenue has increased substantially, realtors said that the number of transactions have not increased.

The declared current land value increase as well as the public's bestowing properties as the means of real estate transfer, are the causes to the higher tax revenue, realtors said.

Real estate agents said that since the gift tax was adjusted to 10 percent in 2010, bestowing properties as the mean of property transfer have increased rapidly. 47,000 properties were bestowed last year, which hit a new record.

A 10 percent gift tax is exacted on property transfer by means of bestowing. The gift tax is much lower than the transaction tax which is calculated based on a property's declared market value, said Jessica Hsu (徐佳馨), director of the research division at H&B Reality (住商不動產). She added that after the implementation of the luxury tax, many people have chosen to bestow properties for real estate transfer to avoid taxes. This has contributed to higher number of property bestowing.

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