Scope of Taxation
The scope of the land value increment tax is land in the territory of Taiwan. In other words, land outside the territory of Taiwan is not under the scope of the land value increment tax. Land that has been assigned a value is subject to the land value increment tax based on the total amount of the land value increment at the time of transfer of title to the land.
Taxpayers
The taxpayers of the land value increment tax are:
- The original landowner for land transferred with compensation.
- The claimer of land title for land transferred without compensation.
- The Dien Right assignor for land with a Dien Right established.
In the transfer of land title, if the land value increment tax due is not paid by the taxpayer within the relevant period, the new title holder of the land can pay the past-due land value increment tax. In cases where the right holder should declare the present value of the land being transferred independently pursuant to Article 47 of the Equalization of Land Right Act, the land value increment tax payable shall be paid by the right holder.
Tax Base
The tax base of the land value increment tax is the "Total Amount of Land Value Increment," which is calculated as follows:
Total amount of land value increment = declared present value for transfer – original decreed value or assessed present value at the previous transfer × consumer price index / 100 – ( land improvement fees + construction benefit charge + land reconsolidation cost-sharing fees + the total amount of the present land value of the donated land for public facility due to land use conversion ).
Tax Rates
The land value increment tax is levied at regular progressive rates or special privileged rates. The regular progressive rates range from 20% to 40%. In addition, in cases where the owner possesses the land for a period of 20 years or more, tax reduction provided by related regulations is applicable. If the area of land for a self-use residence sold by the land owner complies with related regulations, the special privileged tax rate of 10% applies.
Land Value Increment Tax Payable
Total amount of land value increment tax = total amount of land value increment × tax rate - progressive difference.
Total land value increment tax payable = total amount of land value increment tax - tax reduction - land value tax paid because of reassessment of land value (but not exceeding 5% of total amount of land value increment tax).
Exemptions and Reductions
Reductions of and exemptions from the land value increment tax are as follows:
- Land transferred due to inheritance.
- Land acquired through sales or gift according to the relevant regulations by the government, and private land acquired by the government through donation.
- Concerning the expropriation of land, exemption from land tax.
- A 40% reduction on land transferred for the first time after a rezoning, subject to relevant regulations.
Application of Lowest Tax Rate for Movement of Premises
There are cases where a small or medium-sized enterprise (SME)'s industrial premises, because of implementation of urban planning or regional planning so that the industrial premises are not in accord with categorized areas, or where because of pollution prevention, public safety, or the maintenance of natural environment the industrial premises are moved to an industrial district, urban planning industrial district, or industrial land zoned in accordance with the Statute for the Encouragement of Investment. When the SME sells or transfers the land where it was originally located, the land value increment tax will be levied at the lowest rate.
Tax benefits for Investment through Provision of Land in Industrial Districts
Where an investor invests in an SME by providing land in an industrial district, and the SME consents, the shares of the SME may be used as collateral for tax payment. The land value increment tax payable by the investor may be paid in installments over a period of five years commencing in the year the investment was made.
Mergers & Acquisitions
Where a company is carrying out a division or merger/consolidation, or acquires assets or shares pursuant to Articles 27 through 30 of the Business Mergers and Acquisitions Act, with the shares entitled to voting rights as the consideration to pay the merged/consolidated company, and the shares are not less than sixty-five percent of the total consideration, or where a company is carrying out a division or merger/consolidation, the land value increment tax levied on the original land owner shall be recorded under the name of the company which acquired the land after the merger. Within three years after the completion of land transfer registration, if the company transfers the shares with consideration causing it to fall below sixty-five percent of the total consideration, the acquired/divided company shall pay the recorded land value increment tax. If there is any unpaid portion of the tax, the acquired company, the existing company after division, or the newly established company shall be the one to pay.
Tax Refund for Reacquisition of Land
If, after a landowner has sold land that was used for an owner-operated factory, and within two years following the completion of the transfer of registration, the assessed value for the transfer of the land is higher than the balance of the original land value excluding the land value increment tax, the seller (previous landowner) may apply to the tax office for a refund of the portion of the land value increment tax needed to make up the difference to be paid for the sale of land.
When a landowner sells land within two years after the land title is registered, the landowner is entitled to apply for a land value increment tax refund.
