TAIPEI, Taiwan -- When the consolidated land and housing tax is launched next year, the "luxury tax" will be annulled at the same time, Finance Minister Chang Sheng-ford said yesterday.
The Executive Yuan yesterday gave the go-ahead to the consolidated tax tendered by the Ministry of Finance. The law is expected to go into effect on Jan. 1, 2016.
The new tax, which aims to curb short-term speculative investment, levies a 45-per cent tax on transaction gains for properties that are held for one year or less, and a 35-per cent tax on properties that are held between one and two years.
This will render a lower tax payment compared with the luxury tax, which charges based on the sales price, said the finance chief.
The luxury tax, a short name for the Specifically Selected Goods and Services Tax Act, levies a tax rate of 10-15 per cent on properties acquired not for personal use and sold within two years of purchase.
This tends to result in higher tax payments. For example, if a property was acquired for NT$10 million (S$431,500) and sold for NT$11 million in less than a year, under the luxury tax, the seller must pay NT$1.5 million (NT$10 million x 15 per cent).
However, under the consolidated tax system, the seller only has to pay NT$450,000 (NT$1 million capital gain x 45 per cent).
Also, the new tax system stipulates that no tax will be levied on transactions with NT$4 million or less in capital gains.
The rule has been set up since transaction gains mostly fall into this range for self-use properties. Statistics show that 91 per cent of transactions are sold for NT$20 million or less, and with an average 20-per cent return, it translates into a NT$4 million gain, the finance minister explained.
A 10-per cent tax rate will be levied on the amount beyond the NT$4 million mark, but most people will not be affected, Chang said.