Legal experts warn against divorces to avoid property tax

PUBLISHED : Thursday, 14 March, 2013, 5:07pm
UPDATED : Thursday, 14 March, 2013, 5:18pm

Legal experts have warned couples against getting divorced in an attempt to evade a looming capital gains tax.

Authorities in several cities in China have noticed a rising number of couples filing for divorce this month after China’s State Council announced on February 20th it would introduce a 20 per cent capital gains tax on profits from second-hand house sales.

People are exploiting a loophole that allows couples with two properties to divorce, put a house in each person’s name and then sell them tax-free under certain conditions, after which they can remarry.

But law experts are concerned about the practice of “fake” divorce. There is an excessive amount of risk, not to mention the moral issues involved, said Shanghai lawyer Zhang Qianlin, Xinmin Weekly reported.

“People consider the divorces to be fake, but legally speaking they are real. If one party refuses to remarry, there’s nothing the other party can do about it.”

Zhang also pointed out the previously jointly owned house would be one person’s property after the divorce-remarriage process, which could trigger disputes in the future, the Weekly said. 

He Zhanbiao of the Shanghai Civil Affairs Bureau said, “Some men might trick their wives into getting a divorce using the tax as an excuse, but they might have a mistress and truly want a divorce,” Shanghai Daily reported earlier.