A Comprehensive Guide for Foreigners to Buying Property in Taiwan

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Reciprocity Requirement

Foreigners who wish to purchase property in Taiwan must first ensure that their home country allows Taiwanese citizens to buy property under similar conditions. This principle of reciprocity dictates that Taiwan only grants property ownership rights to foreign nationals from countries that provide the same privileges to Taiwanese buyers. Before initiating a real estate transaction, it is essential to verify whether Taiwan has a reciprocal agreement with the country of the prospective buyer.

Types of Property Allowed

Taiwan permits foreigners to acquire residential and commercial properties, as well as land designated for specific purposes, such as business operations or personal residence. However, restrictions apply to the purchase of forest land, fishing grounds, hunting grounds, salt fields, mining land, water source land, military fortifications areas and land along national borders, which cannot be acquired by foreigners. These regulations are in place to protect Taiwan’s natural resources and ensure that land use aligns with national interests.

Approval Process

Foreign buyers must adhere to a structured approval process when purchasing property in Taiwan. The first step involves confirming whether the foreign country is a reciprocal country for acquiring or establishing land rights in Taiwan. Taiwan’s Ministry of the Interior has provided a list for reference. If the country is not on the list, then an equal reciprocity certificate verified by Taiwan’s overseas embassies, consulates, representative offices, or other institutions authorized by the Ministry of Foreign Affairs is required. Following this, the buyer must enter into a Sale and Purchase Agreement with the seller, formalizing the transaction. The purchase must then be registered with the local Land Administration Office to ensure legal recognition. Additionally, all financial transactions related to the property purchase must be conducted through a Taiwanese bank, in compliance with foreign exchange regulations.

Financing & Loans

Foreigners seeking financial assistance for property purchases in Taiwan may apply for mortgages through local banks. However, eligibility depends on various factors, including the buyer’s residency status and income level. Some banks impose additional requirements, such as the need for a local guarantor or a higher down payment, to mitigate financial risks associated with lending to non-residents. These conditions can vary significantly between financial institutions, making it advisable for prospective buyers to explore multiple options before committing to a loan.

Residency & Property Ownership

It is important to note that owning property in Taiwan does not automatically grant residency or visa privileges. Foreign buyers who wish to reside in Taiwan must apply for a visa or a residency permit through the appropriate government channels. The acquisition of real estate does not influence or expedite this process, making it necessary to address residency requirements separately from property ownership.

Tax Obligations for Foreign Property Buyers in Taiwan

Foreign buyers must be aware of various taxes that apply at different stages of property transactions in Taiwan. These tax obligations extend across the purchase, ownership, and sale of real estate and must be carefully considered to ensure compliance with local regulations.

Taxes When Purchasing Real Estate

When acquiring property, buyers are subject to several taxes. The Deed Tax, set at six percent of the government-assessed house value (not including the land value), must be paid within thirty days of signing the sale contract. Additionally, a Stamp Duty of 0.1 percent of the contract value is levied on real estate purchase agreements, with the cost typically shared between the buyer and the seller. Another significant tax is the Land Value Increment Tax (LVIT), which ranges from ten to forty percent based on the government-assessed increase in land value. While this tax is generally the responsibility of the seller, it can sometimes be negotiated with the buyer before finalizing the sale.

Taxes During Ownership

Property owners in Taiwan must also fulfill annual tax obligations. The Land Value Tax is levied at a rate between one and 5.5 percent of the government-assessed land value, with variations depending on the property’s location and usage. Additionally, owners must pay House Tax, which is calculated at a rate between 1.2 and 3.6 percent of the government-assessed building value. These taxes are due annually, with Land Value Tax payments scheduled in November and House Tax payments in May.

Taxes When Selling Real Estate

When selling property, foreign owners are subject to Capital Gains Tax, which follows a progressive structure based on the length of property ownership. For properties held for one year or less, a high tax rate of 45 percent applies to the profit. If the property is sold after one to two years, the tax rate drops to 35 percent. Properties held for two to ten years incur a 20 percent tax, while those held for more than ten years are taxed at 15 percent. However, foreign sellers without a Taiwan residence permit face a flat tax rate of 45 percent if the property is sold within a year of purchase, and a flat 35 percent if the property is sold after one year. Additionally, the Land Value Increment Tax, previously mentioned, applies to sellers based on the appreciation of land value. A final Stamp Duty, calculated at 0.1 percent of the sales contract price, is also imposed, with the cost typically split between the buyer and the seller.

Additional Considerations

Foreign buyers must also be mindful of Taiwan’s foreign exchange regulations, as any capital gains from property sales must be reported. Repatriating funds abroad may require approval from the Central Bank of Taiwan, making it necessary to comply with financial reporting requirements. Furthermore, inheritance and gift taxes apply to property transfers, with rates ranging from ten to twenty percent. These considerations highlight the importance of understanding the broader financial and regulatory landscape before investing in Taiwanese real estate.

Conclusion

Purchasing property in Taiwan as a foreigner is feasible but involves a series of legal and financial requirements that must be carefully navigated. Prospective buyers should confirm reciprocity agreements, complete the necessary approval process, and familiarize themselves with tax obligations to avoid unexpected challenges. Given the complexities of property transactions, consulting with a local real estate expert or legal advisor is highly recommended to ensure a smooth and compliant purchase experience.

Note: this article is not a legal opinion and only intends to provide the reader with some insights. Legal consultation is advised before any acquisition.