Ministry of Finance Amends New Regulations: Real Estate and Land Tax 2.0 Specific Equity Transaction Relaxation

Central News Agency

(Central News Agency reporter Lu Yen-tzu, Taipei, 21st) Regarding specific equity transactions under Real Estate and Land Tax 2.0, the Ministry of Finance today amended the "Operating Essentials for Income Tax Declaration on Real Estate and Land Tax 2.0," relaxing the income calculation method for specific equity transactions. If equity acquired before June 30, 2021, includes real estate acquired before December 31, 2015, related gains and losses will not be considered real estate and land tax income, effective immediately.

To prevent tax avoidance through the guise of company equity transfers for real estate transactions, when Real Estate and Land Tax 2.0 was launched in 2021, it expanded the scope of specific equity transactions subject to taxation. If a transactor directly or indirectly holds more than 50% of the equity of an invested enterprise, and more than 50% of the value of the invested enterprise's equity or capital contribution consists of houses and land within the Republic of China, it should be taxed according to law. However, if the traded shares belong to listed, OTC, and emerging stock companies, they are excluded from application.

The Ministry of Finance today announced the amendment to the "Operating Essentials for Income Tax Declaration on Real Estate and Land Tax 2.0." For income calculation, it relaxes the rule that for shareholders trading equity of an invested enterprise acquired before June 30, 2021, the portion of the transaction income attributable to the value of real estate held by that enterprise acquired before December 31, 2015, as a proportion of the total value of domestic real estate, is excluded from the application of Real Estate and Land Tax.

The Ministry of Finance gave an example: assuming a company holds 100% of a subsidiary's equity, all of which was acquired before June 30, 2021 (old equity). When selling the subsidiary's equity recently, if more than 50% of the subsidiary's equity value is due to holding domestic real estate, and all of it was old real estate acquired before 2015, according to the amended regulations, the income from selling the equity will not be subject to Article 4-4, Paragraph 3 of the Income Tax Act.

To make the ratio calculation more reasonable for determining whether an equity transaction is a specific equity transaction, the new regulations, referencing international rules, stipulate that in addition to calculating the value of a profit-seeking enterprise based on its net worth, if its assets are reasonably and objectively measured by an accountant based on real-price audit and certification data, the total market value of various assets can be used for determination.

In addition, the new regulations also integrate past rulings to clarify the scope of taxation. The Ministry of Finance explained, for example, it clarifies the acquisition date and holding period calculation for real estate acquired through mutual gifts between spouses, continuous inheritance, etc.; if real estate acquired through cooperation between a sole proprietor or partner of a partnership and a landowner is traded within 5 years, a 20% tax rate may apply; if a profit-seeking enterprise actually engages in construction but fails to act as the builder for some reason, and provides relevant proof verified as true, the combined tax calculation regulations may apply.

The Ministry of Finance stated that this amendment integrates external opinions, appropriately relaxes some regulations, and takes effect today. The provisions favorable to taxpayers, such as allowing profit-seeking enterprises to calculate equity value based on the market value of various assets, and excluding the old real estate portion of old equity transactions from Real Estate and Land Tax, are applicable to cases not yet assessed and finalized.

Ouyang Hong, an accountant at PwC Taiwan, pointed out that this revision provides a one-time "old system real estate" gain/loss exemption from the scope of Real Estate and Land Income Tax for many individuals or corporate shareholders who wanted to adjust their equity structure after the Real Estate and Land Tax 2.0 amendment. For domestic enterprise groups that wished to adjust their shareholding structure but were unable to do so due to the tax costs after the Real Estate and Land Tax 2.0 amendment, this opportunity can be utilized for proper planning.

EY Taiwan explained that this revision relaxes and institutionalizes adjustments to long-standing disputes over application determination and income calculation. In addition to helping asset values better reflect actual economic values, it also clarifies the scope of taxation, helping to reduce assessment and collection disputes. (Editor: Yang Kai-hsiang) 1150421

Choose to stand with the facts, every sponsorship you make is a force to protect press freedom.

Download the Central News Agency "First-hand News" APP to stay updated with the latest news.

The text, images, and videos on this website may not be reproduced, publicly broadcast, or publicly transmitted and used without authorization.