萬國法律事務所

The Ministry of Finance has announced last week the draft bill for the enforcement rules of the Special Goods and Services Tax Regulations (commonly referred to as the luxury tax). Construction companies suggest that a sales return and resale of new housing should also be exempt from luxury tax. In addition, the enforcement rules also clearly stipulates that the demolition and reconstruction of, or construction project with constructors for subsequent division and sale of, housing/land for residential purpose by the owner will be exempt from luxury tax only if household registration has been completed for more than one year.

There are 11 exemptions to the luxury tax, the seventh of which pertains to the first transfer following the completion of the construction of the housing by the constructor. As per the suggestions of constructors, the Ministry of Finance has agreed to include in this exemption newly build houses which have been returned by the purchaser to the constructor to be resold by the latter, as is common phenomenon in the industry. The rationale is that said situation would not conflict with the core objective of the imposition of the luxury tax, which is to deter and de-incentivize real estate speculation.

Further, the tenth exemption to the luxury tax pertains to the demolition and reconstruction of, or construction project with constructors for subsequent division and sale of, housing/land for residential purpose by the owner. The enforcement rules further defines “housing/land for residential purpose by the owner” to urban land with area of less than three ares and non-urban land with area of less than seven ares, with more than one year between the household registration and the approved date of demolition or the issuance date of the construction permit.

Officials of the Ministry of Finance indicated that the draft bill of the enforcement rules will be amended based on external opinions received and submitted to review by the Executive Yuan next week. It is expected that the enforcement rules will come into force on June 1, 2011.