NC proposes property transfer tax exemption in rural areas

Choki Wangmo

Finance Minister Namgay Tshering introduced the Property Tax Bill 2020 in National Council (NC) yesterday.

The Bill, passed by National Assembly on February 10, saw amendments on tax for property transfer. The seller, irrespective of whether the property is located in urban or rural areas should pay the tax.

Some members of NC, however, proposed that there should be exemption of property transfer tax in rural areas.

NC’s member from Tashigang, Lhatu, said that the tax exemption on property transfer in rural areas would help develop the communities and create economic opportunities to people, which would help reduce rural-urban migration.

Member from Chukha, Sangay Dorji, supported the argument. He said that people in rural areas sold or transferred their property as a last resort to solve some of the household challenges. “Exemption would benefit people in rural areas.”

Minister said that ownership transfer tax was causing inconvenience and the new amendments were in line with changing times.

For instance, in the current practice, transferring property ownership from grandparents to grandchildren, offering of properties such as land to religious organisations and splitting of joint ownership were liable to pay property transfer tax.

He said that amendment of property transfer tax was futuristic and was intended to narrow the gap. The tax levied in both rural areas is expected to reduce sale of land in rural areas, hence reduced rural-urban migration.

Currently, the tax is paid by the buyer, but the amended Section 7 of the Bill states: “The property transfer tax shall be payable by the seller.” Lyonpo said that he proposed to retain the section as ‘payable by the person specified in the sale deed’, but the majority of the members in NA voted for the amended section, ‘payable by the seller.”

NA fixed property transfer tax at 3 per cent of the property value and reduced the vehicle transfer tax to 1 percent from 5 percent. The reduction is expected to encourage people to transfer the ownership of the property, increasing the government’s revenue base.

The contribution of tax on movable properties like vehicle has been insignificant. Although vehicle must transfer the ownership within 15 days from the sale, people do not follow the rule or wait until the vehicle’s value depreciates to pay the minimum tax.

Most NA members endorsed Section 8 of the Bill, which states: “Notwithstanding Section 7 of this Act, the property transfer tax shall be payable by the buyer if the property is purchased from international and diplomatic agency and personnel.”

This, however, contradicts with the Section 7.

Lyonpo said that there were loopholes and urged NC to review the clause. “For instance, international organisations like the United Nations in the country were exempted tax but when they sell their properties, the buyer has to pay the tax according to the section, which is a loss to the buyer.”

The property transfer tax is one-off payment based on Property Assessment and Valuation Agency.

The House will deliberate on the Bill today.

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