萬國法律事務所

The National Tax Bureau (“Tax Authority”) recently fined a seller of real property in the amount of NT$375,000, in addition to the payment of tax, pursuant to Taiwan’s Specifically Selected Goods and Services Tax Act (“Act”) for using a Registration of Advance Announcement to postpone the transfer of ownership of real property until after the lapse of the two-year period.

The Act, having been in effect since June 1, 2011, stipulates that the selling owner of any building and the land on which it is located or any urban land that may legally be granted a construction permit (“Real Property”) who holds such Real Property for less than two years shall be liable for paying the Specifically Selected Goods and Services Tax (“Luxury Tax”) upon the sale of such Real Property. The tax base for the Luxury Tax is the "selling price" or the "taxable value". The tax rate is 10% if the period starting from the day on which registration of the transfer of the Real Property is completed until the day on which a sale and purchase contract for the Real Property is entered into (“Holding Period”) exceeds one year and is less than two years, and 15% if the Holding Period is equal to or less than one year. If a taxpayer fails to report his sale of Real Property in accordance with the relevant regulations, the taxpayer will be subject to an administrative fine of not more than three times the amount of the tax evaded in addition to collection of the amount of tax owed resulting from the transfer.

Registration of Advance Announcement is a type of registration of restriction that includes the buyer of real property in the registration with the land administration so that the owner may not dispose of the real property without the buyer’s written consent. Registration of Advance Announcement is at times utilized by some sellers of Real Property to evade the Luxury Tax. Such sellers receive a portion of the sale price from the buyers and the buyers apply for Registration of Advance Announcement. The transfer of title registration with the land administration will be applied only after the two-year Holding Period lapses. However, the Tax Authority has emphasized that the Luxury Tax will be levied under the principles of substantive taxation in such an arrangement, and the real Property will be considered being transferred when the Registration of Advance Announcement is made.