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  • Interpretation
  • No.478
  • Date
  • 1999/03/19
  • Issue
    • Is the Ministry of Finance Directive unconstitutional in making “approval of the tax collection agency for payment of land value tax at the rate applicable to residential land for the owner’s use” a requirement for refund of the land value increment tax?
  • Holding
    •        The term “residential land for the owner*s use”referred to in Article 35, Paragraph 1, Subparagraph 1, of the Land Tax Act means, according to Article 9 of the same Act, “the land for residential use on which household registration has been completed by the land owner or his/her spouse or lineal relative and which is not for rent or for business use,”and the Act does not provide the approval of the tax collection agency for imposing the land value tax at the rate applicable to residential land for the owner’s use as a criterion for the determination of such land as residential land for said owner’s use. The Directive T.T.S.T. No. 65634 dated December 27, 1984, of the Ministry of Finance states: “The land owner who sold the residential land for his/her own use and repurchased the land within two years shall not provide such land for rent or for business use from the date on which transfer registration is completed. In addition, the tax collection agency must grant approval to impose the land value tax at the rate applicable to residential land for the owner’s use before the land value increment tax can be refunded in accordance with Article 35, Paragraph 1, Subparagraph 1, of the Land Tax Act.”The tax refund requirement that “the tax collection agency must grant approval to impose the land value tax at the rate applicable to residential land for the owner’s use” is an additional restriction not existing in Article 35, Paragraph 1, Subparagraph 1, of the Land Tax Act, and such restriction is in conflict with the principle of taxation by law under Article 19 of the Constitution and shall not be applicable.
  • Reasoning
    •        Under Article 35, Paragraph 1, Subparagraph 1 of Land Tax Act, after an owner has sold his/her residential land for his/her own use or after such land has been requisitioned, if he/she purchases another piece of urban land of less than 300 square meters or non-urban land of less than 700 square meters for residential use within two years after transfer registration or receipt of the compensation for the requisitioned land, and if the value of the newly purchased land exceeds the balance of the value of the land sold or the amount of compensation of the land requisitioned is less than the land value increment tax, the land owner may, to the extent of the land value increment tax paid by him/her, apply to the authority in charge of tax collection for return of the amount overpaid for the newly purchased land value. Paragraph 2 of the same Article provides: “The provision of the preceding Subparagraph shall apply mutatis mutandis if the land owner purchases (new) land first, and the (old) land is sold or requisitioned within two years after the date of transfer registration of the newly purchased land.”Paragraph 3 provides: “The provisions of Paragraph 1, Subparagraph 1, and Paragraph 2 shall not apply if the land was provided for business use or for rent within one year before the land was sold.”The said provisions expressly provide that the tax payer is entitled to apply for a refund of land value increment tax when meeting the abovementioned statutory requirements. 
      
    •        The Directive T.T.S.T. No. 65634 dated December 27, 1984, of the Ministry of Finance states: “The land owner who sold the residential land for his/her own use and repurchased land within two years shall not have provided such land for rent or for business use from the date on which transfer registration is completed. In addition, the tax collection agency must grant approval to impose the land value tax at the rate applicable to residential land for the owner’s use before the land value increment tax can be refunded in accordance with Article 35, Paragraph 1, Subparagraph 1, of the Land Tax Act.”The said Directive makes the approval for payment of land value tax on the repurchased land at the rate applicable to residential land for the owner’s use a condition for return of the land value increment tax. However, the term “residential land for the owner’s use”referred to in Article 35, Paragraph 1, Subparagraph 1, of the Land Tax Act means, according to Article 9 of the same Act, “the land for residential use on which household registration has been completed by the land owner or his/her spouse or lineal relative and which is not for rent or for business use.” Whether the land owner applies for payment of land value tax on the repurchased land at the privileged rate applicable to residential land for the owner’s use concerns the right to be exercised by the land owner. The tax collection agency’s approval for payment of the land value tax at the rate applicable to residential land for the owner’s use for the residential land for the owner’s use repurchased by the land owner can be used as a reference to decide whether such land falls into the category of residential land for the owner’s use when the land owner applies for refund of the land value increment tax. However, when there is doubt as to whether the tax should be refunded, the tax collection agency should still find out whether the land is for rent or for business use. The land owner may also prove that the land is used as a residence for his/her own use. It cannot be decided that such land is for rent or for business purposes simply because the land owner has not applied to pay the land value tax at the preferential rate applicable to residential land for the owner’s use. The requirement for tax refund that “the tax collection agency must grant approval to impose the land value tax at the rate applicable to residential land for the owner’s use” under the said Directive of the Ministry of Finance is an additional restriction not existing in Article 35, Paragraph 1, Subparagraph 1, of the Land Tax Act, and such restriction is in conflict with the principle of taxation by law under Article 19 of the Constitution and shall not apply. As to whether the case under application meets the requirements for tax refund, the relevant agency shall make a decision based on all the relevant information and the result of investigation of evidence.  
      
    • *Translated by Dr. C.Y.Huang of Tsar & Tsai Law Firm.
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