About Land Value Increment Tax
The land value increment tax was designed to impose a heavy burden on the natural incremental value of land for the purpose of curbing speculation and monopolies in land It is based on a concept contained in the theoretical framework of "Equalization of land Rights" advocated by Dr.Sun Yat-Sen, the founding father of the ROC. The said theory contends that the natural value increment of land is attributable to social development rather than the result of labor or capital investment and, therefore, it should be shared by the general public through the mechanism of the land value increment tax. From this, it is clear that the land value increment tax of our country is not an ordinary tax but a tax with the specific purpose to meet the specific need of a particular period. In other countries it is collected either as a capital gains tax or as regular income tax. However, in our country, it is labelled as a land value increment tax with the following particulars:
Land value increment tax is collected on the total incremental value at the time of the transfer of the title of land which has previously been set at a certain value. For land That has a Dien Right establishes, the original land owner (or the Dien Right assignor) must make prepayment of land value increment tax and the said tax paid is refunded without interest when be redeems the land.
The taxpayers of land value increment tax are as follows:
In terns of its nature, the land value increment tax is a form of income tax and thus, in principle, costs and fees should be deducted to get the net taxable amount. For the convenience of the taxpayer in their declaration of present value of the land being transferred, and for the purpose of minimizing harassment when the collection authority reviews the present declared value, the government announces a present value once a year to be used as the standard present value of transfer for declaration and review. The calculation of the incremental value differs according to these categories; regular land, government acquired land and land auctioned by the courts of law. Their respective details are as follows:
For the transfer of regular land, the government-announced present value at the time the owner-taxpayer makes the transfer declaration or the Dien declaration shall be used in the calculation of the total value increment of the land in question. But in case the declared actual transfer value of land exceeds the announced present value, the declared transfer value shall be used as the basic of calculation.
For land acquired or purchased at a value approved by the county (or city) government, the basic of calculation shall be the lower of the price actually paid by the government or the government-announced value at the date of acquisition.
For land auctioned through the courts of law, the basic of calculation shall be the lower of the actual auctioned price or the government-announced value at the date of the auction.
D. Deduction of the Increment Amount
To get the net increment value, the following itemized amounts shall be deducted from the respective aforementioned calculation and the balance shall be the net increment amount.
When calculating the net incremental value of land, in addition to the deduction's in items (b), (c) above, any change in general consumer prices shall be taken into account and adjusted by the consumer price index announced by the government to derive the net land incremental amount. The formula for the calculation of the natural value increment of the land is as follows: Amount of natural land value increment=declared present value at the transfer of the land-the original decreed value or the assessed present value At the least transfer of land *consumer price index/100-(land Improvement cost + construction benefit fee paid +fee paid for land consolidation + the announced present value of donated land)
E. Structure of the Tax Rates
Land value increment tax is levied with a progressive tax rate in multiples of the original decreed land value and can be termed "multiple cumulative". Its tax rate structure is as follows:
|Class||Formulas for Calculation|
|First Class||Tax payable =total Amount of Value Increment (After adjustment is made pursuant to consumer price index, the increment is not in excess of 100% of the original decreed value or the assessed present value of last transfer) x Rate (20%)|
|Second Class||Tax Payable =Total Amount of Value Increment (After adjustment is made pursuant to consumer price index. The increment is in excess of 100% but less than 200% of the last transfer) X Rate (30%) -- Cumulative Difference (original decreed value or assessed present value of last transfer as adjusted by the consumer price index X 0.10)|
|Third Class||Tax Payable =Total Amount of Value Increment (After adjustment is made pursuant to consumer price index, the increment is in excess of 200% of the original decreed value or the assessed present value of last transfer) X Rate (40%) -- Cumulative Difference (original decreed value or assessed present value of last transfer as adjusted by the consumer price index X 0.30|
Within 2 years after 1 Feb 2002, if the sale of land by the title owner satisfies the above conditions ( E and F ), the land value increment tax as already calculated shall be collected at a further privileged rate of 50%.
F. Privileged Rate
If the sale of self-use residential land by the title owner satisfies the following conditions, the land value increment tax there of shall be collected at a privileged rate of 10%.
The title owner may apply for and enjoy this privileged rate of land value increment tax only once in his (or her) lifetime. The sale of self-use residential land will not qualify for the above-mentioned privileged rate if the attached building has been completed for less than one year and its value does not exceed 10% of the announced present value of the land. Within 2 years after 1 Feb 2002, if the sale of land by the title owner satisfies the above conditions ( E and F ), the land value increment tax as already calculated shall be collected at a further privileged rate of 30%.
G. Reductions and Exemptions
The provisions for reductions and exemptions for land value increment tax are as follows:
H. Refund of Tax in Case of Reacquisition of Land
When a land owner who has sold his land or has had his land requisitioned by the government reacquires the land within two years following the completion of the transfer registration or following the day the land value compensation was received and the reacquired land satisfies one of the following provisions, if the value of the reacquired land is in excess of the balance of the original land value sold or the compensated land value less than the land value increment tax paid, the land owner may apply to competent tax collection authority for refund of the portion of land value increment tax collection authority for refund of the portion of land value increment tax paid to make up the difference to be paid for the reacquisition of the land.
After self-used residential land has been sold or requisitioned, the owner acquires a parcel of urban land not exceeding 3 ares or non-urban land not exceeding 7 ares, also for his own residential use.
After self-operated factory land has been sold or requisitioned, the original owner acquires another parcel of land for factory building within any industrial district as designated by city planning or government categorization.
After self-tilled agricultural land has been sold or requisitioned, the owner acquires another parcel of agricultural land and retains it for self-tilling.
I. Limitations of Tax Refunds in Land Reacquisition
If the land value increment tax has been refunded to a land owner due to reacquisition, and the land owner transfers the reacquired land within five years from the day of completing the transfer registration for a reacquisition, in addition to the land value increment tax to be paid for the subsequent transfer, he must also pay back the tax refunded. A similar return of tax refunded will apply when the land reacquired is being used for purposes other than the original purposes.
J .Penalty Provisions