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Beijing divorces soar thanks to property tax loophole

AFP-JIJI

Beijing’s divorce rate has soared as couples seek to avoid a property tax imposed earlier this year by using a loophole for those whose marriages end, state media reported Tuesday.

Nearly 40,000 couples divorced in the Chinese capital in the first nine months of this year, up 41 percent on the same period in 2012, the Beijing Youth Daily said, citing official figures.

In March, China introduced a nationwide capital gains tax of 20 percent on the profits owners make from selling residential property. But the terms allow couples with two properties who divorce and put each house into one person’s name to then sell them tax-free under certain conditions — after which they can remarry.

The growth rate in divorces was “far higher” than in the previous four years, the newspaper said.

“The exceptionally fast growth is related to tax evasion by some people taking advantage of a loophole in the (new) property purchase regulations introduced by the government,” it quoted Li Ziwei, a marriage expert and former civil affairs official in Beijing, as saying.

Couples in other first-tier cities — where property prices have rocketed in recent years — have also turned to the practice to avoid the capital gains tax, which can amount to tens of thousands of dollars, the paper said.

Homeowners were previously taxed at just 1 or 2 percent of the sale price.

A marriage registration office — where divorce applications are also processed — has put out a sign in Shanghai saying, “There are risks in the property market, think twice before you get divorced,” the Beijing Youth Daily added.

Property prices are a sensitive issue in China and authorities have sought for the past three years to control their rise. As well as the capital gains tax, other measures have included restrictions on purchases of second and third homes, higher minimum down payments and taxes on multiple and nonlocally owned homes in some cities.