A. About Deed Tax
A deed tax was inaugurated in our country in the Eastern chin Dynasty slightly more than one thousand six hundred years ago, with contracts transferring land and building titles as the basis of assessment. At that time, since no modern type of taxation such as income ax, commodity tax, customs duties or dues had been introduced to China, the deed tax, together with the tax on farmland, were the most important sources of the government's fiscal revenue. The Statute on Deed Tax currently in force has been amended seven times since it was first promulgated in December 1940, and unification of collection of the deed tax was not attained until December 1945, when the Ministry of Finance announced the Guidelines for the Assessment of Standard Prices for Immovable for the whole country. In July 1964, the deed tax was designated a local tax. In recent years, the revenue realized from the collection of the deed tax has constituted around 1.5 percent of the total national revenue for local governments. In January 1951, the Executive Yuan promulgated the "Provisional Measures for Uniform Collection of Various Taxes and Assessments in Taiwan Province during the Period of Communist Rebellion" under which collection of the deed tax was suspended. In its place, a land registration fee was imposed in accordance with the Land Law at a rate of 1 percent, and as such a rate was far below the then effective average rate of 5 percent for the deed tax, financing for the local government was seriously affected. As a result thereof, collection of the deed tax was resumed and has now been continued since February 1952.
B. Tax Scope
Article 2 of the Statute on Deed Tax provides that for transactions involving purchases and sales, acceptance of Dien, exchange, bestowal or partition of or on immovable property, or acquisition of ownership thereof by using the prescribed deed forms for payment of the deed tax. However, if the land is located in an area where land increment tax is assessed, the deed tax shall be exempted. So-called immovable property refers to both the land and the fixtures on the land. However, since now the appraisal of land value has been completed for all the land in the Taiwan area and the land value increment tax is assessed for transfer of land title or creation of Dien, the deed tax is collectable in practice in Taiwan only upon such immovable properties as a house or building and other fixtures on land.
The taxpayers of deed tax are those who acquire the title to or Dien of the immovable properties, as described below in accordance with the respective deeds:
- Deed tax on a purchase and sale: to be reported and paid by the purchaser.
- Deed tax on the creation of a Dien : to be reported and paid by the Dien holder.
- Deed tax on an exchange: to be reported and paid by each party to the exchange on the portion allocated to each party.
- Deed tax on a bestowal or a donation: to be reported and paid by the donee.
- Deed tax on a partition: to be reported and paid by the partitioner.
Deed tax on a possession: to be reported and paid by the person who takes possession of the immovable property and legally acquires its ownership.
D. Tax Rates
A. Calculation of Housing Tax The house tax is not levied based on the building cost or market value, but is based on the current value of standard price an applicable tax rate, which is calculated by the formula below,The standard house price × size (acreage) × (1 - an applicable depreciation rate × the years of depreciation) × an adjustment rate based on the level/class of street or road × an applicable tax rate ＝payable house tax.
- Tax rate
Respective Deed Tax Rate Purchase and Sale 6% Dien 4% Exchange 2% Bestowal or Donation 6% Partition 2% Possession 6%
- Deed tax on a purchase and sale: 6 percent of the value of the deed.
- Deed tax on a creation of a Dien: 4 percent of the value of the deed.Where immovable property is first placed under a Dien and then sold and the Dien holder and the purchaser are the same person, or the Dien holder acquires the ownership of the property through a Dien, the deed tax at a rate of 2 percent of the value of the deed for the original Dien shall be assessed so as to make up the difference between the deed tax on a purchase and sale and the deed tax on the creation of a Dien.
- Deed tax on an exchange: 2 percent of the value of the deed. In the event that there is payment for the discrepancy in the exchange values, the deed tax shall be imposed upon the difference at the rate set forth for the deed tax on a purchase and sale. If the value of each of the exchanged properties is different but there is no payment for this discrepancy, the deed tax on an exchange shall first be imposed on the basis of the exchanged property whose value is lower; then, the difference between the property of higher value and the property of the lower value shall be deemed as a donation made to the party originally owning the lower value property by the party originally owning the higher value property for assessment of the deed tax on a donation.
- Deed tax on a bestowal or a donation: 6 percent of the value of the deed. e. Deed tax on a partition: 2 percent of the value of the deed. f. Deed tax on a possession: 6 percent of the value of the deed.
- Calculation of the tax
The amount of the deed tax is calculated by multiplying the applicable tax rate by the value of the deed. However, the fact that it is impossible to verify whether the value of the deed actually reflects the real transaction price would very possibly cause difficulties in tax collection. Therefore, all counties and cities (or municipalities under jurisdiction of the Executive Yuan) have established a Committee for the Evaluation of Immovable Properties to evaluate standard prices for various immovable properties. If the value of the deed reported by the taxpayer is below the standard price, provided, however, that in the purchase of immovable properties sold according to law, or the purchase of publicly owned immovable property through bidding or purchase of immovable properties at auction conducted by a court, the deed tax shall be imposed on the basis of the actual purchase price.
E .Reductions and Exemptions
In order to meet the needs for various government policies, such as development of postal or telecommunication enterprises, investment encouragement ,export promotion ,construction of public housing ,etc.,the measures for reductions and exemptions which have been adopted are as follows:
- Immovable properties acquired for public use by all levels of government, local autonomous agencies, and public schools． However, this exemption shall not be applicable if such properties are used for any business purpose.
- Immovable properties acquired for business use by government-operated postal enterprises.
- Immovable properties whose ownership is acquired by exchange of publicly owned immovable properties or by exchange of immovable properties as a result of land consolidation to meet the official needs of government bodies．
- Where a building which has not yet been completed is transferred, and the new owner of the building does not receive the use license, such a transaction is not subject to the deed tax．
- Transactions involving building in the process of construction, which are transferred from one constructor to another for the purpose of continuing construction and where the second constructor receives a use license, will not be subject to the deed tax．
- Public housing units constructed by the government or through encouragement of investment﹒
- Public housing units repurchased by public housing authorities by exercising the option to repurchase.
- In the case of profit-seeking enterprises specifically approved by the Ministry of Economic Affairs for merger or consolidation, the deed tax and stamp tax resulting there from shall be exempted for the purpose of promoting reasonable and sound operation and management﹒
- Acquisition of a newly constructed standard factory building in the export processing zone from the Export Processing Zones Administration by an export enterprise, or acquisition from the Administration of building construction purchased by the said Administration by requisition.
- Surcharge for belated filing
A taxpayer who fails to file a statement of deed tax within the prescribed period must pay a surcharge equal to one percent of the amount of the tax for each three days of delay; however ,the total fine imposed shall not exceed the amount of tax determined to be due as well as not exceed NT15,000.
- Surcharge for belated payment
A taxpayer who fails to pay the deed tax within the prescribed period must pay a surcharge equal to one percent of the amount of the tax for each two days of delay. If the taxpayer fails to pay the tax and the surcharge for belated payment or the surcharge for belated filing for thirty days or more after the prescribed period ,the matter shall be referred to the court for enforcement﹒
- Administrative fine
A taxpayer who fails to file a statement of deed tax upon transfer of immovable properties and his failure to do so has been discovered by the competent tax collection office at its own initiative or upon information brought by another person shall, in addition to payment of the tax due, be penalized by imposition of an administrative fine equal to one to three times the amount of tax due.