INTRODUCTION TO SPECIFICALLY SELECTED GOODS AND SERVICES TAX ACT

07/01/2011

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Owing to the general public's discontent over soaring real estate prices buoyed by short-term real estate transactions' low transfer tax and inflation driven by luxury purchases, the Taiwanese government consulted foreign legislation and policies to enact the Specifically Selected Goods and Services Act to achieve equilibrium in the housing market and facilitate fair taxation. The Act represents an attempt to curb short-term real estate transactions and luxury purchases, and seeks to meet public expectations by taxing specifically selected goods and services.
The Specifically Selected Goods and Services Tax Act was passed by the Legislative Yuan and promulgated by the President. By a decree of the Executive Yuan, it took effect on 1, June 2011. The gist of the Act is as follows:
I.	Short-term real estate transaction
l	Object of taxation: Houses and lands or urban lands for which construction permits have been issued located in the territory of the Republic of China purchased no more than two years ago. The above excludes reasonable, regular or involuntary transactions in the following situations:
	1.	Where the private residence and the land on which the residence is located are resided by the owner, his/her spouse, and their underage lineal relatives, and are the only property owned by the owner, and the property are not used for commercial purposes or leased out.
	2.	Where a newly purchased house and the land on which the house is located are sold owing to new job posting, involuntary termination, or other reasons not attributable to the seller.
	3.	Where the sale is made to the government of any level.
	4.	Where the land (such as agricultural land) is exempted from the Land Value Increment Tax.
	5.	Where the land is reserved for public use and is transferred before expropriation.
	6.	The houses and lands that are acquired through inheritance or bequest.
	7.	Where the property is being transferred by the builder for the first time following completion of construction.
	8.	Foreclosure.
	9.	Where the bank sell houses and lands that are acquired through mortgage foreclosure.
	10.	Where the private residence(s) is/are constructed by the owner or by a group of owners on the land of the private residence.
	11.	Where the houses and lands are distributed on the basis of the rights exchanged in urban renewal projects. (See Subparagraph 1, Paragraph 1 of Article 2 and Article 5 of the Act)
l	Subject of taxation (taxpayer): The original owner of the sold real estate shall be the taxpayer and be responsible for filing and paying the tax. (See Paragraph 1, Article 4 of the Act)
l	Calculation of tax: If the real estate is sold within one year of purchase, it shall be taxed at 15% of its sale price. If the real estate has been possessed for over one year but less than two years, it shall be taxed at 10% of its resale price when it is resold. Under the Act, the sale price is defined as all the payments received upon sale of specifically selected goods or services by the seller, including any fees received other than the listed price of such goods or services. (See Paragraph 1 of Article 4; Article 7; and Article 8 of the Act)
II.	Luxury goods and services
l	Object of taxation: the specifically selected goods that are sold, produced, and imported or the specifically selected services that are sold in the territory of the Republic of China:
	1.	Every sedan, yacht, airplane, helicopter, super-light carrier with a sale price or after-tax price of NT$3 million or more.
	2.	Every piece of furniture or turtle shell, tortoise, coral, ivory, fur, and product made of any of them with a sale price or after-tax price of NT$0.5 million or more.
	3.	Every certificate of non-refundable membership right (specifically selected service) with a sale price and after-tax price of NT$0.5 million or more, such as a certificate of golf club membership, recreational club membership, or dining club membership. (See Subparagraph 2-6 of Paragraph 1 and Paragraph 2 of Article 2 of the Act)
		But the following specifically selected goods are exempt:
		(1)	Goods that are used to produce other taxable specifically selected goods.
		(2)	Exported goods.
		(3)	Goods that are displayed in exhibitions and will be transported back to the factories or exported after the exhibitions.
		(4)	Goods that are used for education, research, or experiments in public or private schools, or educational and research institutes, or those that are specially used for training or competing in international contests.
		(5)	Sedans used for special purposes like research and development, public safety, or emergency medical aid.
		(6)	Airplanes, helicopters, and super-light vehicles that are not for private use. (See Article 6 of the Act)
l	Subject of taxation (taxpayer):
	1.	The manufacturers that produce and distribute specifically selected goods.
	2.	The recipients or the holders of the specifically selected goods imported.
	3.	The highest bidders, buyers, or recipients of pre-tax specifically selected goods that are auctioned or sold by courts or other competent authorities or agencies.
	4.	The holders of the goods or those who transfer or use tax-free specifically selected goods for purposes that disqualify the goods from tax exemption.
	5.	The business operators who sell specifically selected services. (See Paragraph 2, Article 4 of the Act)
l	Calculation of tax:
	1.	10% tax is imposed on the sale prices of specifically selected goods upon completion of factory production. Sale price is defined by the Act as all the payments received upon delivery of specifically selected goods by the manufacturer, including any fees received other than the listed prices of such goods or services. If the specifically selected goods are subject to Subparagraph 2-6, Paragraph 1 of Article 2, the sale prices should be based on the prices of the same goods sold by the manufacturer during the same month, previous month or nearest months, or the prices of similar goods, whichever is applicable. If the goods are new model or the manufacturer makes no similar goods, the taxpayer may add the estimated revenue, commodity tax and business tax to the cost of the goods to arrive at the sale price, which is subject to adjustment after the goods are actually sold. (See Subparagraph 1, Paragraph 2, Article 4; Article 7; Article 8; and Article 9 of the Act)
	2.	10% tax is imposed upon importation on the sum of the after-tax price of the specifically selected goods plus import tax. If the goods are subject to commodity tax or business tax, such tax should be included in the after-tax price. (See Subparagraph 2, Paragraph 2, Article 4; Article 7; and Article 10 of the Act)
	3.	Under all other circumstances, the tax will be 10% of the sale price. Sale price is defined by the Act as all payments received upon sale of specifically selected goods by the seller, including any fees received other than the listed price of such goods or services. (See Subparagraph 3-5, Paragraph 2, Article 4; Article 7; and Article 8 of the Act)
Chapter 5 of the Specifically Selected Goods and Services Act stipulates penalties for the following situations: where the taxpayers fail to file a tax return or underreports tax for specifi-cally selected goods or services, and where the manufacturers of specifically selected goods fail to follow the regulations to register themselves and prepare or keep the book, receipts, or accounting records. The taxpayers are advised to observe the provisions of this Act and abide by the tax collection procedures so as to avoid being fined or ordered to pay additional taxes.