Developers welcome new property tax passage
Property developers on Saturday lauded a tax reform bill that was passed in the Legislature the previous day, saying market uncertainty will now be removed and property transactions will take off.
Under the new law, a tax of up to 45 percent will be levied on profits from the sale of property, as part of the government’s efforts to rein in high home prices in the local market.
The property capital gains bill, which was put forward by the Ministry of Finance (MOF), targets speculators by imposing the maximum 45 percent tax on people who sell their homes less than a year after purchase.
The tax rate falls to 35 percent if the property has been held for one to two years, 20 percent if it has been held between two and 10 years, and 15 percent for properties held more than 10 years.
Shining Building Business Co. Chairman Lai Cheng-i said hous- ing sales are expected to pick up now, following an extended period of uncertainty over the reform plan, which had hurt market sentiment.
The new tax is scheduled to take effect Jan. 1, 2016 and will apply only to properties purchased after that date.
In the interim, many people are expected to rush to buy homes, Lai said, adding that developers are likely to put a large number of residential and commercial properties on the market for the rest of this year.
Also welcoming the tax passage, Wu Pao-tien, head of the Federation of the Real Estate Development Association of the ROC, said the local property market is expected to return to normal now that the property tax reform has been finalized.
If the property market continues to weaken, the value of property assets will shrink accordingly, he said.
Wu said a
property market will help stabilize the domestic financial situation and eventually impact positively on the country’s entire economic climate.
Transactions of homes, shops and offices fell almost 14 percent annually to 320,598 units in 2014, while in the first four months of this year, they dropped 18 percent year-on-year to 87,567 units, according to Ministry of the Interior statistics.
With the imposition of the new property tax, a luxury tax that was introduced in June 2011 will be abolished.
The luxury tax, which was also put in place to keep housing prices in check, levies a 15 percent sales tax on second homes sold within one year of purchase and a 10 percent tax on properties sold between one and two years after they were bought. The MOF has forecast that the new capital gains tax will bring in an additional NT$4.2 billion (US$135 million) in revenues in the first year.