Taiwan’s Taipei National Taxation Bureau has reiterated that certain share and capital contribution transfers in non-listed companies will be recharacterised as real estate transactions and taxed accordingly, warning that misreporting gains as exempt securities income may result in significant additional tax and penalties.
Taiwan’s The Taipei National Taxation Bureau of the Ministry of Finance stated that, in order to prevent individuals and profit-making enterprises from effectively transferring the real estate and land within China of the invested profit-making enterprises through the transaction of shares or capital contributions of domestic and foreign profit-making enterprises under their control, thereby evading or reducing the tax liability for real estate transaction proceeds without tax exemption, Article 4-4, Paragraph 3 of the Income Tax Act stipulates that, after the implementation of this article on 1 July 2021, any transaction of shares or capital contributions that meets certain conditions shall be regarded as a real estate transaction and subject to real estate transaction income tax, and the provisions of Article 4-1 of the same law on the cessation of income tax on transaction proceeds shall not apply.
This announcement was made on 11 December 2025.
The Bureau explained that, under Article 4-4, Paragraph 3 of the Income Tax Act, if an individual or enterprise trades shares or capital contributions in a domestic or foreign enterprise in which they directly or indirectly hold more than 50% of the shares, and more than 50% of the value of that enterprise’s equity or capital contributions consists of real estate located in Taiwan, the transaction is considered a real estate transaction. However, this does not apply to shares of listed, over-the-counter (OTC), or emerging stock companies. Therefore, for transactions occurring after 1 July 2021, shares or capital contributions in non-listed, non-OTC, and non-emerging companies meeting these conditions fall within the scope of real estate transaction income taxation.
The Bureau provided an example: Company B, which is not listed, OTC, or emerging, operates a real estate trading business with assets primarily consisting of land and buildings, and over 50% of its equity value comes from real estate in Taiwan. Company A purchased 600,000 shares of Company B on 20 October 2022, holding 60% of its shares, and sold 60,000 shares on 30 July 2023, realising a transaction gain of over TWD 5 million. When filing its 2023 corporate income tax return, Company A reported the gain under the exempted securities transaction income category instead of as real estate transaction income. After review, the Bureau imposed additional tax of over TWD 2 million (for a holding period under two years, at a 45% rate) and penalties.
The Bureau reminded taxpayers that when trading equity, they should carefully determine whether the sale proceeds fall under the real estate integrated tax system. Those who fail to report and pay taxes in accordance with regulations may voluntarily report and pay the omitted taxes, with interest but no penalties, under Article 48-1 of the Tax Collection Act, before any audit or investigation by the authorities or designated personnel.
