(Taichung News) In recent years, many corporations and construction companies have sought out well-located vacant land to develop facilities such as logistics centers, reception halls, or retail outlets. After leasing the land from its owner, they independently fund and construct the facilities. Such “build-on-leased-land” examples have become quite common in the market. However, the Taichung City Government’s Local Tax Bureau reminds the public to pay special attention: if a landowner leases land to a tenant who then finances and constructs a building on it, but both parties agree to register the landowner as the builder for the use permit (i.e., the owner of the building), the act will be regarded as a property transaction. As such, it is subject to deed tax and must be duly declared and paid.
The Local Tax Bureau further explains that, in accordance with the Deed Tax Act, before the construction of a building is completed, if ownership is transferred through sale, exchange, or bestowal or donation and the recipient’s name is original listed on the construction license, or the name on the construction license is changed midway, and the license of permit is obtained, taxes shall be filed and paid by the builder named on the license of permit. In other words, if the landowner is not the party who actually financed the construction but is registered as the builder for the building or use permit, it may appear to be an acquisition without consideration. However, in substance, it constitutes an exchange in which the landowner acquires ownership of the building in return for providing the land and the right to use it. This constitutes a transfer of property rights other than money by mutual agreement, and the provisions of the Civil Code concerning sale shall apply mutatis mutandis. Therefore, the landowner is required to pay a deed tax at the 6% rate applicable to sales.
The Local Tax Bureau reminds the public that when entering into a “build-on-leased-land” agreement, if it is stipulated that the ownership of the building shall belong to the landowner, or if the permit of construction or use permit is obtained under the landowner’s name, particular attention must be paid to the obligation to declare deed tax. In such cases, the deed tax must be declared at a rate of 6% within 60 days of obtaining the use permit. Late declarations are subject to a penalty of 1% of the tax due for every three days of delay, up to a maximum of 10%, and capped at NT$15,000. If underreporting or non-reporting is discovered, an additional fine of one to three times may be imposed. The public is therefore urged not to take this matter lightly.
For any further questions, feel free to call the Local Tax Bureau’s toll-free service hotline at 0800-000321 or 22585000 and press 1 to connect to the A++ Station, where dedicated will be available to help.