Mr. Fang called to inquire about the reason for his receiving of a tax bill for house and land transactions income tax and an administrative fine? His house and land was auctioned off by court due to his inability to pay off his debts, and with all the proceeds being used to pay off the debts, he did not receive any income, so he believed that there was no such income.
According to the National Taxation Bureau of Kaohsiung, Ministry of Finance, individuals who have traded house and land subject to the house and land transactions income tax after January 1, 2016, whether voluntarily or not, and regardless of whether they have gained or lost, must file a return to the National Taxation Bureau at the location of their domicile within 30 days from the day following the date of ownership transfer registration of the house and land. Those who have tax payable amounts based on different tax rates depending on the length of the holding period are required to pay the house and land transactions income tax and submit the payment receipts when filing the tax return. The auction by court is also a type of house and land transaction, so it is still necessary to file a tax return according to law. However, the filing period starts from the day following "the date when the successful bidder receives the certificate for the transfer of rights." Moreover, it is a type of involuntary transactions announced by the Ministry of Finance. If the holding period of the house and land is less than 5 years, the transaction income can be taxed at a lower tax rate of 20%.
For example, on September 16, 2019, Mr. Fang acquired property A for NT$1.2 million. Due to his inability to repay a number of personal debts, the creditor petitioned the court to auction property A, and the successful bidding price was NT$1.8 million. The successful bidder obtained the certificate for the transfer of rights on July 1, 2021, and Mr. Fang should complete the filing within 30 days from July 2, 2021, i.e. before July 31, 2021. Moreover, although the tax rate should be 45% according to law as the holding period is within 2 years, the tax amount can be calculated at a lower tax rate of 20% because it is an involuntary transaction. However, Mr. Fang mistakenly thought that he was not required to file a tax return, so he was fined an administrative monetary penalty of NT$40,000 in addition to paying the tax, after the Bureau assessed the income to be NT$510,000 based on the information obtained.
Due to the recent impact of the COVID-19 pandemic, many people have difficulties in turnover and the number of foreclosures is increasing. Therefore, the Bureau has a special reminder for the public that, even if the house and land transactions income tax payable is zero, any failure to file a tax return will still be punished, so the public should pay special attention to it in order to protect their own rights!
Contact: Mr. Liang, Head of the Second Examination Division.
Tel: 07-7256600ext.7250