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MOF Interpretation of the Scope of "Urban Land for which a Construction Permit may be Lawfully Issued" Prescribed by the Specifically Selected Goods and Services Tax Act
Ruling Ref. No.: Tai-Cai-Shui-Zi-10200142010 issued by the Ministry of Finance (MOF), dated 12 December 2013, indicates that in cases where, according to the laws and regulations, urban land is prohibited to be used for construction in the prescribed period or is generally prohibited for construction use except when being approved for temporary building(s), such land still falls within the scope of "urban land for which a construction permit may be lawfully issued" prescribed by Subparagraph 1, Paragraph 1, Article 2 of the Specifically Selected Goods and Services Tax Act ("SSGSTA").
In practice, urban land that is restricted for construction use for a certain period of time stipulated by laws and regulations (including the land prior to the zone expropriation, in the process of being expropriated or under the process of land consolidation), or is restricted but eligible for applying for temporary building use, is frequently transacted for the purpose of a short-term gain which results in the increase of its price. To enforce the legislative intent of the SSGSTA, the MOF's ruling stipulated that the Specifically Selected Goods and Services Tax ("SSGST") should be assessed if the aforesaid land is sold by a seller who does not retain ownership for two years or longer. According to Ruling Ref. No.: Tai-Cai-Shui-Zi-10104563500 issued by the MOF, dated 1 June 2012, the land under the process of land consolidation in respect of which a sale and purchase agreement had been entered into prior to the promulgation of this ruling can be exempted from penalty if the SSGST payable is subsequently settled. With respect to other land stipulated above in respect of which a sale and purchase agreement had been entered into prior to promulgation of the MOF's newly issued decree, the penalty can also be waived, provided that the SSGST payable is duly settled.