TAIPEI, Taiwan — The Executive Yuan said Thursday that a capital gains scheme targeting the local property market is scheduled to go into effect in 2016, with Premier Mao Chi-kuo (���v��) saying that this will be a milestone in Taiwan’s tax reforms.
A Cabinet meeting approved the tax scheme in which home sellers will face a 45 percent tax if they sell their property after having owned it for less than one year. In cases where they have held the property for one to two years or two to 10 years, or more than 10 years, the tax rates will fall to 35 percent, 20 percent and 15 percent, respectively.
The tax reform marks a significant change from the current practice in which sellers are taxed based on the current government-assessed property value, which is merely a fraction of the actual selling price.
Sellers who dispose of homes used for self-dwelling purposes will face a 10-percent flat tax rate if they secure more than NT$4 million (US$131,148) in profit from their transactions, according to the tax scheme.
The new taxation will only affect capital gains posted from disposal of property the sellers have bought after January 2014 for investment purposes or after January 2015 for self-dwelling purposes.
The tax reform scheme needs ratification by the Legislative Yuan before implementation.
Mao said that the capital gains tax for the property market is designed to curb speculation in the local property market and rein in high-flying property prices in Taiwan, while the new tax will be able to minimize the impact on sellers who have had their property for self-dwelling purposes.
Finance Minister Chang Sheng-ford (�i���M) said the new tax scheme is expected to help the government collect NT$4.2 billion (US$138 million) in tax revenue in the first year.
Mao said the government will use the increased tax revenue to improve the country’s social welfare.