TILL ‘TAX’ DO US PART
In Singapore, there was a recent rush for ‘decoupling’ – transferring ownership of properties previously under joint ownership to one of the owners.
The legal transactions allow the exiting parties to be treated as first-time buyers when buying their next property, so that they don’t have to pay the 7 percent additional buyer’s stamp duty, as recently introduced by the government to cool the property market.
These owners may think that it is a smart move to take advantage of the loophole, without knowing that they are doing so at their own risk.
For one thing, the law will see them giving up their share of the property on their own free will. It implies that, in the event of any dispute in the future, they have no right to claim their share of any rental return or any profit from the sale of the property, regardless of the amount they have contributed to the initial deposit and mortgage installments of the property.
Recently, the single mother of a reputable lawyer in Hong Kong told the reporters the sad story of how her son confiscated more than ten million dollars of her money after the sale of her property. When she asked for the return of her money, she couldn’t get him on the phone anymore. She was even denied access to the house.
On March 1, China announced a 20 percent property gain tax on residential properties sold by individuals – a 20 times increase from the previous one percent levy. This was a last attempt to cool the overheated property market before handing over the country to the new government.
Unlike Singapore, where housing measures can take effect immediately the day after press announcement, the Chinese government didn’t specify the effective date of the new policy. Government in different provinces were asked to make their own decision. This was a gracious gesture of the policy maker to give fellow government officials sufficient time to exit the property market themselves before imposing the new rule.
For common people, there is an exemption on the 20 percent property gain tax: Divorced couples with two properties under the same person’s name can sell them tax-free.
For tax evasion, many greedy couples file for divorce to sell their properties in time and pocket the profit, before tying the knot again.
Sacrificing marriage for investment is nothing new in China. In 2011, when the Chinese government forbade the buying of more than two properties in first-tier cities, there was already a wave of divorce to make it possible for ex-couples to own more properties.
To cater to the need of couples chasing the property dream, perhaps a new marriage vow can be adapted from the existing one at Singapore Registry of Marriage,
“I promise to love you, honor you, comfort you and keep you in sickness and in health and be faithful to you so long as we both make money (from our properties).”
Husbands (and some wives as well) who are having an affair can now make use of the greed of their spouse to con them into signing the divorce papers without any alimony, under the false impression that the transition is just a means to evade tax or to buy more properties.
Who could have thought that a property cooling measure with good intentions can turn out to be a marriage and family wrecker?
Another story I read in a China local paper: A man wanted to buy an apartment for the convenience of meeting his mistress. But he could not trust the mistress to buy the property under her name. He decided to put it under a friend’s name, while offering him a sum of money for forfeiting his tax-free status to own a second property. The friend was happy to do so. Anyway, he couldn’t afford to buy any property in this red hot market.
Everything went well until property prices climbed through the roof. The friend thought that he was silly to accept such a small amount of money, compared with the profit he could have pocketed from the sale of the property. He tried to blackmail the man for more money but in vain. Out of frustration, he killed the man so that he could become the real owner of the property.
Beware of who you part your properties with. It might cost you your properties, your marriage, your family, and even your life!
Article first appeared on Property Soul: http://propertysoul.com/2013/03/28/till-tax-do-us-part/