Taiwan: Overview

RENTAL YIELDS

Last Updated: Apr 21, 2009

Higher this year but still very low

Gross rental yields in Taiwan are very low, at an average of 2.84%. The highest yielding apartment size is a 75 square metre (sq. m.) apartment, which yields no less than 3.56%.

Apartments in Taipei sell for around US$4,700 per sq. m, with a 120-sq. m unit selling for US$470,000. Such an apartment could be expected to rent for around US$1,000/month.

At these rates of return, it is truly puzzling that anyone is willing to own residential real estate in Taipei. The obvious answer if you have the great pleasure of living in the now-charming city of Taipei, is to own somewhere else (like Bangkok) and to lease your unit in Taipei. Arbitraging the markets is good for your purse - and arguably good for the economy, as it contributes to more reasonable pricing.

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TAXES AND COSTS

Last Updated: Jan 05, 2009

Rental income tax is high in Taiwan

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	20%	20%	20%
Click here to see a worked example
Source:			Disclaimer

Rental Income: The gross income of non-residents is taxable at 20% with no exemptions or deductions allowed. There is also 5% VAT on rentals.

Capital Gains: Capital gains realized by non-residents are treated as regular income, and are taxed at the personal tax rate of 20%.

Inheritance: Estate duty is levied at progressive rates.

Residents: Residents are taxed on their income from Taiwanese sources at progressive rates, from 6% to 40%.

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BUYING GUIDE

Last Updated: Nov 16, 2006

Buying costs are moderate in Taiwan

The total roundtrip cost of buying and selling a dwelling is around 10.26% - 13.3% of the property's value, including the real estate agent's 4% - 6% fee, which is shared by the buyer (1% -2%) and the seller (3% - 4%). To register the property requires three procedures, which can be completed in about five days.

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LANDLORD AND TENANT

Last Updated: Jun 27, 2006

Pro-tenant laws lead to avoidance

If the tenancy laws were properly followed, Taiwan could be regarded as pro-tenant.

Rent Control: There is rent-control, and tenants have security of tenure. However, most landlords catering to the low income segment do not follow the law.

However, those who cater to the expatriate and high income market have no choice but to follow the law. To avoid the legal disadvantages, most high-end apartments rent as serviced apartments.

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ECONOMIC GROWTH

Last Updated: Apr 30, 2008

Strong Economic Growth

Taiwan, the Republic of China, is a modern-day anomaly in international politics. It is an independent nation, but is not recognized as a sovereign state by the community of states. In 1949, the nationalist government led by President Chiang Kai-shek fled to Taiwan ahead of the advance of Communists under Mao Zedong. The government-in-exile established Taipei as its capital.

The People’s Republic of China still considers Taiwan a renegade province. The small island nation of 23 million people has formal diplomatic relations with only 25 countries and has no seat in UN. Its GDP per capita in 2007 was one of the highest in Asia at US$15,758.

Taiwan’s economy had been growing rapidly, after a slump in 2002. The base lending rate was lowered from 7.1% in 2002, to 3.7% in 2003. GDP bounced back and rose by 6.1% in 2004, 4.0% in 2005, 4.6% in 2006 and 4.2% in 2007. The present housing boom has been the partial result.

In March 2008 Ma Ying-jeou of the Kuomintang Party (KMT) was elected president, defeating Chen Shui-bian of Democratic Progressive Party (DPP). Chen’s strong anti-mainland stance had begun to worry people. He increasingly challenged Beijing's ‘one China’ position. In August 2007, the country attempted to join the UN for the first time under the name Taiwan, rather than the Republic of China. In addition, both the party and his family were beset by corruption allegations.

The election of president Ma may possibly boost the market further, because the expectation is that Ma will ease restrictions on real estate purchases by Chinese individual investors.