Wednesday, October 30, 2013

Unintended consequences? Property measures drive divorces in China

From what I've seen, the formality of marriage isn't as important as the private rituals in China. I've been told a few times that someone isn't considered "married" until they have the banquet irrespective of the legal papers. This is, however, probably not good policy. via WSJ:

In March, China’s State Council, or cabinet, said it would strictly enforce a 20% tax on profits from the sale of the seller’s second or subsequent home. Typically, most sales are taxed at only 1% to 3% of the home’s value. In days following the announcement, staff at marriage registration centers in Shanghai and Nanjing said that there was a rush of divorces and had to extend their opening times. So far, however, only Beijing city has implemented this capital gains tax.

A rush to divorce isn’t new in China. In 2010, when cities rolled out restrictions limiting families to only one additional home purchase, many couples sought a divorce to bypass the rules. Some marriage registration centers have also put up signs — “There are risks in the property market, take heed in a divorce” is one example — to warn people about the risks of divorcing for property gains.

This is how it works:

If a couple owns two or more homes jointly and wants to sell one, they would have to fork out the capital gains tax. If the couple divorces, each party would have one home registered in his or her name. When that home is sold, no capital gains tax would be levied.

No comments: