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Land Value Increment Tax

About Land Value Increment Tax

The land value increment tax was designed to impose a heavy burden on the natural incremental value of land for the purpose of curbing speculation and monopolies in land It is based on a concept contained in the theoretical framework of "Equalization of land Rights" advocated by Dr.Sun Yat-Sen, the founding father of the ROC. The said theory contends that the natural value increment of land is attributable to social development rather than the result of labor or capital investment and, therefore, it should be shared by the general public through the mechanism of the land value increment tax. From this, it is clear that the land value increment tax of our country is not an ordinary tax but a tax with the specific purpose to meet the specific need of a particular period. In other countries it is collected either as a capital gains tax or as regular income tax. However, in our country, it is labelled as a land value increment tax with the following particulars:

A.Tax Scope

Land value increment tax is collected on the total incremental value at the time of the transfer of the title of land which has previously been set at a certain value. For land That has a Dien Right establishes, the original land owner (or the Dien Right assignor) must make prepayment of land value increment tax and the said tax paid is refunded without interest when be redeems the land.

B.Taxpayers

The taxpayers of land value increment tax are as follows:

  • For land transferred with compensation, the original title owner.
  • For land transferred without compensation, the acquired title owner.
  • For land with a Dien Right established, The Dien Right assignor. In the above provisions, "transfer with compensation" means sale-purchase, exchange, government acquisition or requisition at value.

C. The Basic for Land Value

In terns of its nature, the land value increment tax is a form of income tax and thus, in principle, costs and fees should be deducted to get the net taxable amount. For the convenience of the taxpayer in their declaration of present value of the land being transferred, and for the purpose of minimizing harassment when the collection authority reviews the present declared value, the government announces a present value once a year to be used as the standard present value of transfer for declaration and review. The calculation of the incremental value differs according to these categories; regular land, government acquired land and land auctioned by the courts of law. Their respective details are as follows:

  • Regular land

    For the transfer of regular land, the government-announced present value at the time the owner-taxpayer makes the transfer declaration or the Dien declaration shall be used in the calculation of the total value increment of the land in question. But in case the declared actual transfer value of land exceeds the announced present value, the declared transfer value shall be used as the basic of calculation.
  • Government acquired purchased land

    For land acquired or purchased at a value approved by the county (or city) government, the basic of calculation shall be the lower of the price actually paid by the government or the government-announced value at the date of acquisition.
  • Court auctioned land

    For land auctioned through the courts of law, the basic of calculation shall be the lower of the actual auctioned price or the government-announced value at the date of the auction.

D. Deduction of the Increment Amount

To get the net increment value, the following itemized amounts shall be deducted from the respective aforementioned calculation and the balance shall be the net increment amount.

  • Where there is no transfer after the first governmental decree of specific land value, this original decreed value shall be deducted.
  • Where the land has been transferred after the first governmental decree of specific land value, the assessed present value at the payment of land value increment tax for the last transfer shall be deducted.
  • The total expense paid by the title owner for improvement of the land, including fees paid for public construction and fees paid for the land consolidation, and the announced present value of donated land at donation, if the land was donated without compensation due to change in land zones which required changes in the percentage of land to be used for public facilities, if any, shall be deducted.
  • During the period of the ownership of the land in question, any supplemental payment of land value tax paid, consequential to reassessment of the land value, pro rated to the part of the land being transferred, shall be deducted from the land value increment tax payable, shall be deducted from the land value increment tax payable, but the total deduction of this item shall be limited to 5% of the land value increment tax payable for an instant land transfer.

When calculating the net incremental value of land, in addition to the deduction's in items 3, 4 above, any change in general consumer prices shall be taken into account and adjusted by the consumer price index announced by the government to derive the net land incremental amount. The formula for the calculation of the natural value increment of the land is as follows:

Amount of natural land value increment=declared present value at the transfer of the land-the original decreed value or the assessed present value At the least transfer of land *consumer price index/100-(land Improvement cost + construction benefit fee paid +fee paid for land consolidation + the announced present value of donated land)

E.Formula for calculating the Amount of Land Value Increment

1.Tax rate on regular land

The tax rates on regular land under the land value increment tax come in 3 classes. Calculation Formula for Land Value Increment Tax to be levied

Tax Class Calculation Formula
Class 1 Amount of Tax to be levied =Total amount of Land Value Increment 【less than 100% of the originally set land price or the reported value of last transfer (adjusted per general consumer price indices of Taiwan Area)】× tax rate (20%)
Class 2 Amount of Tax to be levied =Total amount of Land Value Increment 【more than 100% but less than 200% of the originally set land price or the reported value of last transfer (adjusted per general consumer price indices of Taiwan Area)】×【Tax rate (30%) –[ (30% - 20%) × reduction rate ]】– accumulated difference 【 The originally set land price or former transfer value( adjusted per general consumer price indices of Taiwan Area) × A】.
Note:
Owner held land less than 20 years, no reduction rate, A=0.10.
Owner held Land longer than 20 years, reduction rate is 20% and A=0.08
Owner held land longer than 30 years, reduction rate is 30% and A=0.07
Owner held land longer than 40 years, reduction rate is 40% and A=0.06
Class 3 Amount of Tax to be levied =Total amount of Land Value Increment 【more than 200% of the originally set land price or the reported value of last transfer (adjusted per general consumer price indices of Taiwan Area)】 × 【Tax rate (40%) –[ (40% - 20%) × reduction rate] 】– accumulated difference 【 The originally set land price or former transfer value( adjusted per general consumer price indices of Taiwan Area )× B】
Note:
Owner held land less than 20 years, no reduction rate, B=0.30.
Owner held land longer than 20 years, reduction rate is 20% and B=0.24
Owner held land longer than 30 years, reduction rate is 30% and B=0.21
Owner held land longer than 40 years, reduction rate is 40% and B=0.18

Fast Calculation Table for Revised Tax Rate

Length of time held Tax Class Under 20 years More than 20 years More than 30 years More than 40 years
Class 1 a×20% a×20% a×20% a×20%
Class 2 a×30%-b×10% a×28%-b×8% a×27%-b×7% a×26%-b×6%
Class 3 a×40%-b×30% a×36%-b×24% a×34%-b×21% a×32%-b×18%

Remarks:

a= Total amount of Land Value Increment

b= Originally set land price or the reported value of last transfer (adjusted per consumer price index. )

* Note

Reduction tax rate = Original tax rate -【(Original tax rate – Min. tax rate) × reduction ratio】

  • If held more than 20 years, reduction ratio is 20%
    Class 2 tax rate: 28%=30%-【(30%-20%) × 20%】 and the original accumulative difference 10% reduced to be 8% at the same time
    Class 3 tax rate: 36%=40%-【(40%-20%) × 20%】 and the original accumulative difference 30% reduced to be 24% at the same time
  • If held more than 30 years, reduction ratio is 30%
    Class 2 tax rate: 27%=30%-【(30%-20%) × 30%】 and the original accumulative difference 10% reduced to be 7% at the same time
    Class 3 tax rate: 34%=40%-【(40%-20%) × 30%】 and the original accumulative difference 30% reduced to be 21% at the same time
  • If held more than 40 years, reduction ratio is 40%
    Class 2 tax rate: 26%=30%-【(30%-20%) × 40%】 and the original accumulative difference 10% reduced to be 6% at the same time
    Class 3 tax rate: 32%=40%-【(40%-20%) × 40%】 and the original accumulative difference 30% reduced to be 18% at the same time
  • Visitor:2071 people  Update:2015-11-18
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