House Replacement and Tax Refund

2021-11-01

In the case of replacing old house with a new one, the owner may apply for tax refund for the consolidated income tax as well as the land appreciation value taxes paid if the purchase price for the new house is higher than the selling price for the old.

According to Taiwan’s tax laws, filings of both the consolidated income tax and land appreciation value tax are required when selling a house together with the land.

However, the tax refund for the consolidated income tax and land appreciation value tax is available if the sales of the previous residential house is for purpose of replacement and within two years, whether it’s 'buy-first-and-sell-later' or 'sell-first-and-buy-later' scenarios.

The requirements are summarized below:

I. Consolidated Income Tax

  1. Requirements:
    The targets of the transaction are limited to the residential properties, including land and house, which are used by the owner, the spouse, or their minor children without renting or using them for business operations.

  2. Application deadlines:
    Within five years after the replacement of the properties following transfer registration in the 'buy-first-and-sell-later' scenario, or at the same time when reporting the sale of the previous house and land in the 'sell-first-and-buy-later' scenario.

  3. Tax refund formula:
    (1) Repurchase amount/Selling price = A, and A>=1
    Refundable tax amount = Tax paid for the house and land sold
    (2) Repurchase amount/Selling price = A, and A<1
    Refundable tax amount = Tax paid for the house and land sold x A

II. Land appreciation value tax

  1. Requirements:
    When selling the previous self-use land and repurchasing the new one, the owner must be the same person, and the house above the land must be owned by the owner, the spouse, or direct relatives after valid house registrations. Also, there should be no renting or business activities conducted within one year before the sale of the house and land, and that the city land space should not be over 300 square meter (approximately 90.75 pings), while the non-city land space should not be over 700 square meter (approximately 211.75 pings).

  2. Application deadlines:
    Within ten years after transfer registration in either the 'buy-first-and-sell-later' or the 'sell-first-and-buy-later' scenario.

  3. Tax refund formula
    The current transfer value of the newly purchased land as reported – the current transfer value of the land sold as reported – the land appreciation value tax paid = A
    (1) When the land appreciation value tax paid <=A, it can be refunded in full.
    (2) When the land appreciation value tax paid > A, the A tax amount can be refunded.


As a reminder, after applying the tax refund for the repurchasing, do not transfer or change use. Otherwise the tax refund will be requested by the tax authority.
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