Taiwan’s legislature last Friday (April 9, 2021) passed amendments to the Income Tax Act to increase capital gains tax on property sales. The move aims to curb speculative activity in the real estate market and follows recent cooling measures targeted at reining in the booming residential market, which saw total transaction volume surge by 8.8% y-o-y and capital values rise by 3.9% y-o-y over 2020.

The capital gains tax revisions, which take effect on July 1, 2021, are intended to discourage the sale of properties held for short periods. According to the revisions, the tax rate on local residents selling a property within two years of its purchase will be increased from 35% to 45%. The bill also imposes a tax rate of 45% on local enterprises, which currently pay just 20% on such gains under corporate income tax rules, with the aim of preventing private investors from setting up companies to avoid capital gains tax.

For foreign nationals and companies, a capital gains tax of 45% will be levied on property sales within two years of purchase. The revisions also widen the scope of properties applicable to the capital gains tax, with transactions of pre-sale homes and transfers of shares in companies predominantly holding real estate in Taiwan now subject to the tax. The new rules will apply retroactively to properties acquired in and after 2016.