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  • Interpretation
  • No.296
  • Date
  • 1992/03/27
  • Issue
    • Is the interpretation decree by the Ministry of Finance constitutional in stipulating that auction proceeds shall, after the deduction of cost expenditures, be calculated as income derived from the trading of property and subject to income tax assessment together with other income?
  • Holding
    •        Proceeds from an auction sale ordered by the courts under the Compulsory Enforcement Act shall, after the deduction of cost expenditures, be calculated as income derived from the trading  of property and subject to income tax assessment together with other income in accordance with Article 14, Paragraph 1(7) of the Income Tax Act. The Directive T.T.S.T. No. 37365 dated December 2, 1977, of the Ministry of Finance is intra vires the provisions of the Income Tax Act and not contrary to Article 19 of the Constitution. 
      
  • Reasoning
    •        Article 19 of the Constitution provides that everyone has the duty to pay tax in accordance with law. Article 2, Paragraph 1, of the Income Tax Act expressly provides that any persons whose source of income is the Republic of China shall be subject to composite income tax assessment on such income derived in the Republic of China in accordance with the provisions of the Income Tax Act. Similarly, Article 14, Paragraph 1, of the Income Tax Act expressly provides that any income derived from the trading of property or entitlement shall be calculated towards the total individual composite income and be subject to composite income tax assessment. When a debtor’s property is auctioned by order of the courts under the Compulsory Enforcement Act, the proceeds shall, after the deduction of the original acquisition cost and other expenditures incurred in the acquisition, improvement and transfer of the said property, be deemed as income derived from the trading  of property. Any surplus after the deduction shall be calculated towards the total composite income of the debtor and subject to composite income tax assessment in accordance with Article 14, Paragraph 1(7) of the Income Tax Act. The Directive T.T.S.T. No. 37365 dated December 2, 1977, of the Ministry of Finance stipulates that proceeds from the auction of property seized by the courts shall nevertheless be subject to the provisions of the Income Tax Act and that the auction price shall, after the deduction of cost expenditures, be calculated as income derived from the trading of property and subject to income tax assessment together with other income. This is intra vires the provisions of the Income Tax Act and not contrary to Article 19 of the Constitution. 
      
    • *Translated by Professor Wen-Yeu Wang.
      
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