Fengyuan Branch, National Taxation Bureau of the Central Area, Ministry of Finance stated that, according to Articles 4-4 and 24-5 of the Income Tax Act, when a profit-seeking enterprise sells houses or land acquired after January 1, 2016, the transaction income or loss shall be calculated by deducting relevant costs, expenses, or losses from the total income. The remaining balance is the taxable income, which shall be taxed separately at the applicable rate of 45%, 35%, or 20%, depending on the holding period of the property, and then consolidated for payment.
If a profit-seeking enterprise sells multiple pieces of real estate in the same year that are subject to the above calculation method, the transaction losses should first be offset against the transaction income from properties taxed at the same rate in that year. Any remaining losses may then be offset against the transaction income from properties taxed at different rates in the same year.
The Branch further explained that, under the Land Tax Act, the land value increment tax paid—except for the portion corresponding to the total amount of land appreciation that was not deducted from the real estate transaction income—may not be listed as a cost or expense. After deducting the total amount of land appreciation calculated based on the publicly announced land value in accordance with Article 30, Paragraph 1 of the Land Tax Act, the remaining balance of the transaction income shall not be included in the business income of the enterprise.
Furthermore, if a profit-seeking enterprise sells a building it constructed for the first time after completion along with the underlying land, the real estate transaction income calculated as above, after deducting the total amount of land appreciation based on the publicly announced land value, shall be included in the taxable business income. If the remaining balance is negative, it shall be treated as zero; if the transaction income is negative, it may be deducted from the business income of the enterprise, but the total amount of land appreciation may not be deducted.
The Branch provided an example: In 2023, Company A in Taiwan sold three pieces of real estate (B, C, and D), resulting in a real estate transaction income of NT$1,000,000, a transaction loss of NT$600,000, and a transaction income of NT$500,000, respectively. The applicable tax rates based on the holding period were 20%, 35%, and 45%, and the total amount of land appreciation was zero. Since there was no transaction income at the same tax rate to offset, the NT$600,000 loss could be offset against income from properties taxed at different rates in the same year. Therefore, the loss could first be offset against the NT$500,000 income taxed at 45%, and then the remaining NT$100,000 against the NT$1,000,000 income taxed at 20%. Any non-offset amount may be carried forward to offset the house and land transaction income within the following 10 years.
The Branch reminded that when profit-seeking enterprises sell multiple real estate properties subject to the Income Tax on House and Land Transactions, they should carefully follow the relevant laws and regulations to correctly calculate the transaction income. For further inquiries, taxpayers may call our toll-free service number 0800-000321 during business hours. The Branch will be pleased to assist.
Contact person: Profit-seeking Enterprise Income Tax, Estate and Gift Tax Section, Fengyuan Branch, National Taxation Bureau, Ms. Lai. Li-Ting
Tel: (04)25291040 ext. 111.