The practice that land taxes are not exempt for non-urban lands provided for public infrastructure is declared unconstitutional pursuant to a judicial interpretation (Taiwan)

2019.7.5
Luke Hung

The Judicial Yuan rendered the Shih-779 Interpretation of July 5, 2019 (hereinafter, the “Interpretation”), declaring that the practice that land taxes are not exempt for non-urban lands provided for public infrastructure is unconstitutional and should be reviewed in two years.

According to the facts underlying this Interpretation, the Applicant sold the land at issue.  The Finance and Local Tax Bureau of Tainan City Government held that although a portion of the land at issue was currently used for a road, still it was a non-urban land for transportation use rather than a land reserved for public infrastructure as delineated under an urban plan and did not meet the criteria for exempting land value incremental taxes in accordance with Article 39, Paragraph 2 of the Land Tax Law (hereinafter, the “Provision at Issue”).  Therefore, the land value increment tax was assessed based on the tax rate for ordinary lands.  After a final decision was rendered against the Applicant in an administrative action subsequently brought by the Applicant pursuant to applicable procedures, the Applicant applied for constitutional interpretation.

Pursuant to the Interpretation, the provision on the exemption of land value incremental taxes under Article 39, Paragraph 2 of the Land Tax Law only exempts the land value incremental tax on a land reserved for public infrastructure as delineated pursuant to law.  As for a non-urban land delineated for transportation use and is determined to be reserved for public infrastructure pursuant to law, the land value incremental tax is not exempt.  This portion of the provision does not meet the gist of  equal protection under Article 7 of the Constitution.  Relevant agencies are required to review and amend their requirements relating to the Land Tax Law pursuant to the gist of this Interpretation in two years after the promulgation date of this Interpretation.

In addition, the Tai-Cai-Shui-0900457200 Circular of November 13, 2011 from the Ministry of Finance, which interpreted that the provision on the exemption of land value incremental taxes under Article 39, Paragraph 2 of the Land Tax Law shall not apply to non-urban lands (delineated for roads) for transportation use, shall not be cited any more beginning with the promulgation date of this Interpretation.

As for the 90-Nong-Qi-900102896 Circular of February 2, 2011 from the Council of Agriculture, which interpreted that the provision on the exemption of land value incremental taxes under Article 37, Paragraph 1 of the Statute for Agricultural Development shall not apply to nonagricultural lands for highways under the Highway Law, this provision does not contradict the principle of taxation prescribed by law under Article 19 of the Constitution and the principle of legal reservation under Article 23 of the Constitution.