Foreign Company Purchases of Land, Pay Attention to the Taiwan Heavy Tax of Integrated Housing and Land Tax
The integrated housing and land tax implemented since 1 January 2016, the profit for the individual from purchasing and selling property, the tax to be levied will base on the years that the individual held. There are four class intervals of tax, and it will be levied according to the years of the property that held by the individual, for instance, levy 15% of the income tax (holds the property for more than 10 years), levy 20% of the income tax (holds the property for 2 to 10 years), levy 35% of the income tax (holds the property for 1 to 2 years) or levy 45% of the income tax (holds the property for less than 1 year). It will be taxed separately, the tax shall be filed within 30 days after the completion of the registration of transfer of ownership.
According to the information from the tax authority, for the foreign company that registered a branch office in Taiwan, they should in accordance with the Articles No.24-5 of the Income Tax Act, if the property under the name of the company applies to the integrated housing and land tax, the income from selling the property will apply to the special tax rate, the tax rate will be 45% for the income derived from the transferred house and land held for a period of no more than 1 year and the tax rate will be 35% for the income derived from the transferred house and land held for a period of more than 1 year.
In other words, the integrated housing and land tax for the branch office of the foreign company that purchases and sell of the property is similar to the four class intervals for the individual, however, the company will only take two higher class intervals, even the property held for more than 10 years, the company will still need to levy 35% of the integrated housing and land tax.
There may have the foreign investor that bought a company shares for the purpose of purchasing or selling the property, the Taiwan tax authority reminds that, according to the regulations of the Income Tax Act, if the foreign investor that bought the half of the shares of a foreign company, and there are up to 50% of the share value of this foreign company is consisting by the property in Taiwan, this transaction will deem as the oversea shares transaction. In the view of the Taiwan tax authority, this situation belongs to the target of taxation for the integrated housing and land tax, and at the same time, will require to compute the integrated housing and land tax from the income of shares transacted.
According to the information from the tax authority, this regulation mainly stipulates against the branch office of the foreign company, it also applies to the foreign company without a business place in Taiwan and files the tax return through the logistics company or the accounting firm.
According to the information from the tax authority, if the foreign company establishes a subsidiary company in Taiwan, the subsidiary in Taiwan is an independent entity, therefore, the subsidiary company deemed as the local company in Taiwan. The income from the transactions of the property will consolidate with the Annual Corporate Income Tax and will tax with a tax rate of 20%.
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