Chinese home buyers fake divorce to avoid taxes

As government’s new property tax policy announced on March 1, it has been a trend that Chinese home buyers are rushing to get divorced, in order to sell their houses without paying extra taxes.

According to Reuters, at Shanghai’s Zhabei District marriage registration center, officials divorced 53 couples in a single day in March.

According to the new policy, property owners must pay a 20 percent capital gains tax on sales of second houses. However, if a couple with two properties divorce, they can move on property into the husband’s name and the other to the wife. This loophole leads many couples in Beijing and other major cities in China to fake divorce, sell the houses separately without paying taxes, and then remarry, reported by World Crunch:

Professor Xie Baisan from Fudan University says the phenomenon first appeared in 2009, when couples tried to avoid paying much higher interest rates on mortgages taken out for the purchase of second homes.  He believes the new housing policy could lead to one million fake divorces in China.

Most often these couples have a proviso in their divorce agreement stating that they still live together. Some will even remarry once the mortgage has been taken out or the property tax has been paid.

Here is a news video by NDT on China about the new policy and the trend of fake divorce:

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