Land value increment tax is a duty to be paid at the time of transfer of land title and is calculated based on the total amount of land value increment by applying a progressive tax rate; the “total amount of land value increment” refers to the net of the total present value of land at the time of transfer subtracting the present transfer value at the time of acquisition or the originally assigned land value.
Levy of Land Value Increment Tax
- At the time of transfer of land ownership: Land that has been assigned a value shall be subject to land value increment tax based on the total amount of land value increment at the time of transfer of land title.Land transferred by succession, public land sold or donated by all levels of government according to law, and private land transferred to any level of government asa gift areexempted from land value increment tax.
- Land with the right of Dien established: For land that has been assigned a value, the Dien maker shall pay land value increment tax in advance according to the law at the time of creation of Dien. The originally paid land value increment tax shall be returned without interest at the time when the Dien maker redeems the property.
- Taxpayers of Land Value Increment Tax
- Transfer with consideration or compensation: the original title owner shall be the taxpayer. Examples includetransfer by sale, exchange, government acquisition or requisition ad valorem.
- Transfer without consideration or compensation: The person who acquires ownership shall be the taxpayer. Examples includetransfer by succession or as a gift.
- Creation of Dien: When the right of Dien is created for land with an assigned value, the Dien maker shall pay land value increment tax in advance; the Dien maker shall be the taxpayer.
- Illustrations of the Calculation of Land Value Increment Tax: Land value increment tax = Total amount of land value increment × Tax rate – Progressive difference –Tax reduction for long-term holding –Supplemental payment of land value tax – Legal reduction of tax Total amount of land value increment = Present transfer value declared– Original decreed land value or previous transfer value× (CPI in Taiwan / 100) – (Cost of land improvements + Community development fees + Cost of land consolidation + Announced current value of donated land that is donated for public facilities without compensation due to change in land use)
Explanation of terminology:
- Present transfer value declared: Either the aggregate value of contracts or the announced current value of land shall be declared. If the present transfer value declared is lower than the announced current value of land, the competent authority may acquire the land ad valorem or levy land value increment tax based on the announced current value of land.
- Previous transfer value: The present value of the land for calculation of land value increment tax at the time of previous transfer.
- Original decreed land value: The land value at the first assessment of land value by the government
- General tax rates: Three-level progressive tax rates (20%, 30%, 40%) are applied according to the magnitude of increment.
Level 1 tax rate: 20%
Tax amount = Total amount of land value increment {Exceeding the original decreed land value or previous transfer value (based on Taiwan CPI-adjusted value) by less than 100%} × Tax rate (20%)
Level 2 tax rate: 30%
Tax amount = Total amount of land value increment {Exceeding the original decreed land value or previous transfer value (based on Taiwan CPI-adjusted value) by over 100% but less than 200%} × {Tax rate (30%) – [ (30% - 20%) × Reduction rate]} – Progressive difference (based on the Taiwan CPI-adjusted original decreed land value or previous transfer value × A)
Notes:
Land held for not more than 20 years, no reduction, A = 0.1
Land held for more than 20 years, reduction rate = 20%, A = 0.08
Land held for more than 30 years, reduction rate = 30%, A = 0.07
Land held for more than 40 years, reduction rate = 40%, A = 0.06
Level 3 tax rate: 40%
Tax amount = Total amount of land value increment {Exceeding the original decreed land value or previous transfer value (based on Taiwan CPI-adjusted value) by over 200%} × {Tax rate (40%) – [(40% - 20%) × Reduction rate]} – Progressive difference (based on the Taiwan CPI-adjusted original decreed land value or previous transfer value × B).
Notes:
Land held for not more than 20 years, no reduction, B = 0.3
Land held for more than 20 years, reduction rate = 20%, B = 0.24
Land held for more than 30 years, reduction rate = 30%, B = 0.21
Land held for more than 40 years, reduction rate = 40%, B = 0.18
2. Tax rate for self-use residential land: 10%