Beijing, Shanghai divorces soar over property-tax loophole

Beijing, Shanghai divorces soar over property-tax loophole
A couple on the right posing for pictures in Shanghai.

BEIJING - Divorce rates in China's two wealthiest cities, Beijing and Shanghai, have soared after the announcement of a property tax that includes a loophole for couples who split up, figures show.

Nearly 40,000 couples divorced in the Chinese capital in the first nine months of this year, jumping 41 per cent on the same period in 2012, according to figures released by Beijing's civil affairs officials this month.

Similarly, divorces in Shanghai -- where concerns over the tax were high -- leaped almost 40 per cent over the same period, data from authorities in the commercial hub showed.

But figures from the southwestern metropolis of Chongqing, where the tax has yet to be imposed, had divorces there rising by just over seven per cent.

In March China announced a nationwide capital gains tax of 20 per cent on the profits owners make from selling residential property.

But the terms allow couples with two properties who divorce and put each house into one person's name to then sell them tax-free under certain conditions -- after which they can remarry.

The capital's divorce growth rate was "far higher" than in the previous four years, the state-run Beijing Youth Daily reported Tuesday.

"Some of these people divorced in order to avoid the capital gains tax," Zhang Dawei, director of research at real estate agency Centaline China in Beijing, told AFP. "They will quickly remarry."

Getting separated on paper is currently the "only feasible" way to escape the tax, he added.

With property prices skyrocketing in recent years, the capital gains tax can amount to tens of thousands of dollars in China's first-tier cities if fully implemented.

Homeowners were previously taxed at just one or two per cent of the sale price.An exemption from the tax is available for vendors who are selling their only home and have owned it for more than five years.

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