Individuals selling presale houses should pay attention to the tax filing requirements at the point of transaction to avoid being penalized!
According to the National Taxation Bureau of Kaohsiung, Ministry of Finance, starting from July 1, 2021, in order to promote the normalization of house and land transactions, individuals selling presale houses with their building location (including the red list) obtained after January 1, 2016 should file the house and land transaction income tax within 30 days from the next day of the transaction completion date. However, if individuals sell with a profit before June 30, 2021, they must file the gains from the transaction of properties in the individual income tax return for the year of sale. If there is any omission, please supplement for the omission as soon as possible to avoid being penalized.
The Bureau provides the following example: Person A signed a presale house purchase contract with a construction company for the total price of NT$8 million on September 3, 2019. After paying NT$0.9 million in installments according to the contract, Person A sold the presale house to Person B on November 5, 2020 for NT$1.9 million as consideration. Person B inherited Person A's original rights and obligations, and continued to pay NT$0.7 million in installments to the construction company, and then sold the right of the presale house to Person C for NT$3.2 million on January 30, 2022 when the market price of the house increased. The relevant tax regulations are as follows:
(1) Person A should file the income from the property transaction when filing the individual income tax return for the year 2020.
Person A sold the presale house on November 5, 2020 (before June 30, 2021) at a profit, which constitutes the income derived from transactions of property and right, and has to report the income from the property transaction in the individual income tax return for the year 2020. The amount of the income should be the transaction price of NT$1.9 million at the time of the transaction, minus NT$0.9 million of the cost paid to the construction company and the amount of all expenses paid to "actually" acquire, improve and transfer the property (Note: there is "no" requirement to calculate the fee at 3% of the transaction price for the income from the property transaction).
(2) Person B should file the house and land transaction income tax return.
Person B sold the presale house on January 30, 2022 (after July 1, 2021). Regardless of whether there is a profit or not, Person B should file the house and land transaction income tax within 30 days from the next day of the transaction completion date. The transaction price should be the actual consideration of NT$3.2 million received from the buyer, Person C (excluding the subsequent payment paid to the construction company by Person C), and the payment of NT$1.9 million to the predecessor, Person A, and NT$0.7 million to the construction company should be considered as the deductible costs. When calculating the deductible transferring expenses, if there’s no document of evidence was provided, or the total amount listed on the documents of evidence was not more than 3% of the transaction price, the deductible expenses may be assessed as 3% of the transaction price (NT$3.2 million x 3%; shall not exceed NT$0.3 million). After deducting the costs and expenses, regardless of the tax amount, shall file an individual house and land transactions income tax return.
The Bureau would also like to remind individuals and profit-seeking enterprises that, if they are penalized by the competent authorities for the resale of red lists or presale houses in violation of the provisions of the Equalization of Land Rights Act, the amount of the penalties should not be deducted from the income of the house and land transaction income tax. If the public has any questions, they can call the toll-free service hotline at 0800-000321, or visit the website of the Bureau (https://www.ntbk.gov.tw) to make an online inquiry through the "National Tax Assistant" of the national tax smart customer service.
Provided by: First Individual Income Tax Section
Contact person：Ms. Lee
Phone number: (07)7256600 ext.7222
Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=b214620b749d4e1aa2754191bb03ad4a