2021-10-21
When renting a house to someone, the taxes to pay largely depend on the tenant’s status. This is governed under Article 5 of the House Tax Act which was amended in 2014. According to Taiwan’s tax laws, rental income shall constitute a part of the income tax to file for the year, and the original self-use 1.2% house tax and 0.2% land value tax will be raised to 1.5% - 3.6% for the house tax (depending on the various non self-use tax rates imposed on by the local governments) and 1% - 5.5% for the land value tax (depending of the total value of the land).
Below is an example:
Mrs. Wang rents her house to someone in January 2021 for NT$12,000 monthly rental. Assuming:
If, however, the tenant qualifies for rental subsidies (as mid or low-income residents or handicapped residents with mental or physical diseases) as recognized by the local governments to be a tenant of public interests, then the tax rates for both the house tax and land value tax shall be reduced to those applicable to the self-use house and land (1.2% as the house tax and 0.2% as the land value tax). Further, if the tenant receives government subsidies, the monthly rent lower than NT$15,000 shall be tax free (which was lower than NT$10,000 before the June 9, 2021 amendment in the law), with the surplus part being subject to the 43% operating expense ratio.
If the landlord participates in managing and renting an apartment complex to low income or handicapped residents in the form of a social welfare program, the monthly rent lower than NT$15,000 shall be income tax free (which was lower than NT$10,000 before the June 9, 2021 amendment in the law), while the surplus part shall be subject to the 60% operating expense ratio, and in which case different tax reduction rates in both the house and land value tax may apply pending different local governments’ regulations.
In the case of a contractor managing and renting an apartment complex in the form of a general rental program with the rental period being over one year, the monthly rent lower than NT$6,000 for each house shall be tax free; while if between NT$6,000 and NT$20,000, the 53% operating expense ratio shall apply; and if over NT$20,000, the 43% operating expense ratio shall apply, and in which case different tax reduction rates in both the house tax and land value tax may apply (although local regulations has not yet regulated).
Notice that tax benefits mentioned above only focuses on income tax as the national tax, while both house tax and land value tax are local taxes with varying tax reduction rates only to be decided by the local government. When in doubt, you may contact the National Tax Authority for income tax issues or contact the local tax authorities for house and land taxes issues.
Income Tax Law Amendments and Impact on Real Estate in Taiwan 2021
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Provided by Kingdoms Law