Capital gains tax

Chinese couples divorce to avoid property tax

PUBLISHED : Wednesday, 06 March, 2013, 3:50pm
UPDATED : Thursday, 07 March, 2013, 1:06am

Chinese couples are flocking to divorce to evade a new tax on home sales after the government cracked down on property speculation, the Shanghai Daily newspaper reported on Wednesday.

China’s central government last Friday issued rules to rein in house prices, including a nationwide capital gains tax of 20 per cent on profits owners make from selling residential property.

But a loophole allows couples with two properties who divorce and put each house into one person’s name to then sell them tax-free under certain conditions, after which they can remarry, the state-backed newspaper said.

Government marriage registration offices – which also handle divorces – in China’s commercial hub of Shanghai were swamped by scores of couples this week trying to untie the knot, including at least one pregnant woman, the paper said.

“She told me she came here to avoid the possible loss in a property transaction, and I could say nothing,” it quoted a harried official saying at the registry in the city’s Yangpu district, which saw divorces double.

She told me she came here to avoid the possible loss in a property transaction, and I could say nothing

“I told all of them to come here again for remarriage registration,” he told the newspaper.

An exemption for the tax – which was previously only an option available to local governments, many of which did not impose it – is available for vendors who are selling their main home and have owned it for more than five years.

Shanghai’s civil affairs bureau confirmed the planned tax had triggered a rise in the number of divorces, but declined to give a total for cases across the city, the newspaper said.

An official cautioned wives to beware, however, warning that some unfaithful men might actually want a permanent divorce.

“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,” He Zhanbiao of the Shanghai Civil Affairs Bureau told the newspaper.

Three years ago another set of rules introduced to control the property market, including limits on buying second homes, also sparked a trend of snap divorces so that both members of a couple could own a property.