Alternative Minimum Tax
Since 2006, Taiwan has enforced an Alternative Minimum Tax (AMT) policy on individuals in an effort to increase tax liability for those who have higher-than-average income but pay lower-than-average tax as a result of various exemptions, deductions, and wealth planning strategies employed by these groups.
If your annual basic income exceeds TWD 6.7 million, then you are required to calculate your tax obligation according to the AMT rule (essentially a flat 20% tax on the excess amount) and pay whichever is higher between your Alternative Minimum Tax System (AMT) tax and the Income Basic Tax (IBT) tax. More details on how to calculate this can be found in our first article in the Taiwan tax series).
If you are in the income bracket that requires you to calculate AMT, we highly recommend consulting a tax professional to ensure that you are not paying more tax than you need to!
Taiwan Property Tax
Capital gains tax on property transactions in Taiwan was expanded in recent years; as of January 2021 an amendment was passed to increase taxes on gains from property transactions, for properties sold after January 1, 2016.
A summary of progressive tax rates for property transactions is presented in the table below. Note that the rate varies based on how long the property was held, and whether or not you are a tax resident.
Calculating Taxes Owed on Property Transactions
To calculate the taxable gain from your property transactions, apply the following formula:
Taxable Gain = sales price - purchase cost - expenses related to transaction - incremental change in land value
For example:
If you are a resident taxpayer, and meet the following criteria, you are also eligible for a TWD 4 million exemption. Any gain less than TWD 4 million will be exempt, and any excess gain will be taxed at a flat rate of 10%.
You, your spouse and underage children have had a household registration at the property in question for 6 consecutive years
You have not used the property for business or profit from lease, rental, etc.
You have not claimed the same exemption in the past 6 years
Important notes about real-estate transactions
Transactions of pre-sold apartments are counted as real property transactions and subject to the property tax
Losses from property transactions can be carried forward for up to 3 years to offset future taxable gains from other property transactions.
Source: Ministry of Finance
The information in this section is current as of February 2023.
Land Value Tax
If you own land or real estate property, you are also subject to the Land Value Tax, an annual tax on the value of your real estate assets. Taiwan is known for implementing a very low land tax rate for self-use residential land and property. For urban areas under 3 acres and non-urban areas under 7 acres, the annual rate is 0.2%
For non-residential land and properties, the progressive rate can range from around 1% to around 5%, but these types of properties are beyond the scope of this article. More information can be found here from the Taiwan DOT website, or can be provided by a certified tax professional.
Filing Property Tax
The Land Value Tax filing period is November 1 - 30 each year.
Property transaction taxes are filed separately from your income tax. Once the title of the property has been transferred, you are required to submit the relevant tax documents and any supporting documents to the tax office within 30 days. Be sure to provide all the necessary evidence and documentation needed to support claims for transaction-related expenses, land value change, and losses from previous transactions.
If you need help preparing these documents, Del Sol CPA and Associates has a team of experienced professionals who are ready to help. Please don’t hesitate to reach out to us with questions or inquiries.
Copyright © 2023 by Del Sol CPA Services
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