Newsletter
Reformation of Policies on Industrial Land
The National Development Council (NDC) issued a press release on 24 November 2014 stating that, considering the importance of industrial land to investment and in order to encourage overseas Taiwanese businesses to return and invest in Taiwan, the Ministry of Economic Affairs (MOEA) approved a project to reform policies on industrial land ("Reformation Project") for submission to the Executive Yuan for approval.
The two main objectives of the Reformation Project are to identify and make full use of existing industrial land ("First Objective") and to increase suitable industrial land ("Second Objective"), as elaborated below:
The following measures will be implemented to achieve the First Objective:
(1) Increase the cost of possessing idle industrial land: The MOEA will revoke a factory registration if the factory has never been in operation in accordance with the Factory Management Act. The MOEA will also notify the local tax authority of the individual/company holding such factory registration for the local tax authority to cancel such registration holder's entitlements to preferential tax rates for house tax and land value tax. In addition, the NDC plans to double the maintenance fee for public facilities so as to facilitate the effective use of industrial land.
(2) Increase the transaction charges for short-term purchase and sale of land: According to the Act Governing the Taxation of Specific Goods and Services (aka the Luxury Tax Act; "LTA"), if any property (land and house) or urban land with a construction permit is sold within two years of purchase, a 10% or 15% luxury tax will be payable by the subsequent purchaser. The March 2014 draft amendments to the LTA include the levy of luxury tax on the sale of industrial land (i.e., non-urban land).
(3) Scrutinize holding of industrial land via financial instrument: The Financial Supervisory Commission (FSC) intends to propose a standard contract for the financing of industrial land. The FSC plans to require financial institutions to execute, before providing financing, a financing agreement (in line with said standard contract) with each applicant ("Land Owner") and to incorporate into the financing agreement the Land Owner's government-approved proposal on the establishment of the factory. Such financing agreement would be included as one of FSC's auditing items for the financial institutions. In the event of any breach by the Land Owner of the financing agreement, the financial institution may reduce the amount of credit facility, increase the interest rate, and/or cease to provide financing so as to prevent the Land Owner from hoarding industrial land. In addition, the FSC will set up a database for idle land and a blacklist.
(4) Expropriate idle industrial land: The NDC is considering including in the Statute for Industrial Innovation a provision for the government's buyback of idle industrial land at market price or the original sales price. A land value increment tax would be levied on the buyback of the idle industrial land.
(5) Avoid losing industrial land.
(6) Intermediation of idle industrial land: Currently, there are 878 hectares of idle industrial land in Taiwan, 70% of which will be used by the land owners as planned. The NDC will intermediate the sales of the remaining 220 hectares over the next three years (70 hectares per year) so as to increase the utilization of industrial land.
With respect to the Second Objective, the MOEA and the NDC will take into account the environmental impact, availability of resources, industrial needs and other factors, and establish industrial parks within industrial clusters. The main measures for achieving the Second Objective are to (1) develop new industrial parks, (2) encourage applications from the private sector for development of industrial parks, (3) establish standards for reserving industrial land, and (4) identify new mechanisms for developing industrial parks.
If the Executive Yuan indeed approves the 10 measures above for achieving both Objectives, a significant reduction in idle industrial land and the avoidance of short supply of industrial land could be expected.