Land Value Increment Tax Cannot Be Deducted from The Profit-Seeking Enterprise Income of The Transac
National Taxation Bureau of Kaohsiung, Ministry of Finance, states that, since January 1, 2016, when profit-seeking enterprises sell houses and lands acquired after January 1, 2016, or acquired after January 2, 2014 and possessed within 2 years (new-type houses and lands), in accordance with Paragraph 1, Article 24-5 of Income Tax Act, the balance of deducting Total Amount of Land Value Increment, was calculated according to Land Tax Act, from the House and Land Transactions Income, should be counted in the Amount of the Profit-seeking Enterprise Income. On the other hand, the House and Land Transactions Income is the balance of deducting the related costs, expenses or losses from the income. Because the Total Amount of Land Value Increment has been deducted from the House and Land Transactions Income already, to avoid double deduction, Land Value Increment Tax depicted cannot be regarded as a cost or expense again.
For example, suppose that company A acquired house and land on June 30, 2016 for the cost of NT15 million, and sell the house and land on July 31, 2017 for NT25 million. Assuming that the expense excluding Land Value Increment Tax was NT3 million, Total Amount of Land Value Increment, calculated according to Land Tax Act, wasNT2 million, and the Land Value Increment Tax was NT0.4 million. The Amount should be counted into the Profit-seeking Enterprise Income as the following:
1.The House and Land Transactions Income=NT25 million -NT15 million-NT3 million=NT7 million
2.The amount counted in the Profit-seeking Enterprise Income=NT7 million-NT2 million=NT5 million
The Bureau also points out that the Land Value Increment Tax, paid by profit-seeking enterprise in accordance with Land Tax Act, cannot be recognized as cost or loss for the sales of the new-type houses and lands, but can be deducted from the income for the sales of the non new-type houses and lands, in accordance with Paragraph 7,Article 90 of Regulations Governing Assessment of Profit-seeking Enterprise Income Tax.
Contact: Mr. Lin, Revenue officer of the first Examination Division