Reselling a condominium - fees and taxes.
Tax is the price we pay for living in modern society – government collects money from taxpayers and uses it for financing the state and overall welfare. The tax is collected from income, at almost every step of production and distribution (VAT) and even from the sale.
It is no different when selling a condominium (or a house, land, apartment…) and, in this case, more than one type of tax/fee is involved – transfer fee, specific business tax (if applicable), stamp duty (if applicable) and income withholding tax. Let’s look at each type of tax/fee in more detail.
The transfer fee is a government fee collected by the local Land Office upon transfer of ownership and is set at the rate of 2% over the appraised value of the property. The appraised value is usually much lower than the actual price the property sells for (registered sale value) and is calculated by the Land and Treasury Department.
Specific business tax
This type of tax is applicable to businesses that do not pay VAT (usually business such as financial institutions and others) and also natural persons that sell their property within five years of the purchase registration date. In the resale of a real estate property, the specific business tax is an assessment tax on the transfer and is calculated from the registered sale value or the appraised value (whichever is higher). The tax rate is currently set at 3.3%.
However, there are exceptions to this tax if any of the following conditions is met, the transfer of property is exempted from specific business tax:
- The seller has possessed the property more than five years before the transfer and used it as his residential home (it was the seller’s domicile starting not later than one year from the date of purchase)
- The seller transfers the real property to the legal heir or an heir by a will
- The seller transfers the real property to a legitimate child, but not including an adopted child
- The seller transfers the real property without consideration to government agencies
- The seller transfers the real property without consideration to temples, churches or mosques
- The exemption is limited to the transferred portion which does not make the total area of the estate acquired by temples, churches or mosques exceed than 80,000 square meters
- The transferred real property has been used as the principal place of residence, and the seller’s name appeared in the house register for not less than one year from the date of acquiring such property
- The property transferred was acquired through inheritance, etc.
Similarly to the specific business tax, stamp duty is also calculated from the registered or appraised value, whichever is higher. The rate is 0.5% and liability to paying this government fee depends on the fact whether the seller is subject to paying the specific business tax or not. If specific business tax applies, the seller is exempt from the payment of stamp duty.
Income withholding tax
Both corporate and personal income tax can be involved. Withholding tax taxes the gain from the sale of a property and its calculation depends on a number of factors. For more information about calculating personal income withholding tax, read one of our previous articles.
In the case of a company selling the property, the withholding tax fee is fixed at 1% of the registered or appraised value, whichever is higher.