Scope of Taxation

The scope of land value increment tax is land in territory of Taiwan. In other word, land outside territory of Taiwan is not under the scope of 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 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.

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. If the current value for transfer is reported solely by the title holder, the tax payable should be paid by the title holder.

Tax Base

The tax base of the land value increment tax is the "Total Increment Amount of Land Value", which is calculated as follows:

Total Increment Amount of Land Value = declared current value for transfer - original decreed value or assessed current value at the previous transfer × consumer price index/100 - ( land improvement cost + construction benefit fee + land rezoning fee + claimed current value of donated land ).

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 increment amount of land value X 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 re-valuation 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 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 because of pollution prevention, public safety, maintenance of natural environment, so that the industrial premises are moved to 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 District

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 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 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 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.