If a transaction goes wrong and you receive liquidated damages, remember to declare your income tax. (File photo)
In a real estate transaction, if both parties terminate the contract at the end, be aware that there is still a tax to be declared. Failure to report may result in a fine of up to twice the amount of tax evaded.
Zheng Wenzai, director of the Zhengye Land Dealers Association, said that the house for sale in one case was a rental property. Due to the "sale and purchase does not break the lease", the handover time of the house must wait until the lease contract expires. The buyer agreed to cooperate with the handover time, so the two parties agreed that the handover time should be completed 10 months after the signing of the sales contract. The sales contract was completed in the concession between the buyer and the seller. Unfortunately, the delivery time was about to expire, but the tenant still refused to move, which made the seller miserable.
According to the sales contract, the buyer has deposited 8 million yuan of self-prepared funds into the guarantee account. According to the breach of contract, the seller should return the 8 million yuan and agree to compensate the buyer for the 8 million yuan paid and to pay the buyer separately as penalty liquidated damages.
Zheng Wenzai said that when encountering real estate sales disputes, court litigation is the last line of defense, because the results of litigation are often protracted and time-consuming, and will increase the breach of contract costs of both parties, as well as court judgment fees, attorney fees, etc., which may make the original case worse. Fortunately, this case went through many negotiations and mediations by the agency company. In the end, both parties took a step back and paid 1 million yuan as liquidated damages and terminated the sales contract.
Zheng Wenzai said that he thought the story was over, but he didn’t expect that the buyer called us a few days ago, hoping to provide us with the cancellation of the sale and purchase contract at that time. It turned out that the liquidated damages received last year had forgotten to declare income tax in May this year, and he might be taxed or even punished by the IRS.
It turns out that if there is a breach of contract in the sales contract, this income must still be reported as income tax. According to the Ministry of Finance’s Taiwan Finance and Taxation Letter No. 30131 on January 9, 2008, other income falling under Category 10 of Article 14, Paragraph 1 of the Income Tax Act should be combined with the income for that year and declared for taxation. Failure to report may result in a fine of up to twice the amount of tax evaded.
Zheng Wenzai said that because in similar cases, the ownership transfer registration was not completed, and the real price registration was not completed, only the buyer and seller, the agent and the local government knew. As for whether the party in breach of contract will file a report? The answer is ready to come out. He also reminded that if similar income is forgotten and has not been reported or investigated by the tax collection agency, the individual can automatically make a tax return to the tax collection agency at the place of residence as soon as possible without penalty. Otherwise, if found, he will be punished in accordance with regulations in addition to tax repayment.
