China Property Taxes Trigger Divorces

By Chen Yilian
Chen Yilian
Chen Yilian
March 12, 2013 Updated: April 6, 2013

Divorces are surging in China as couples try to avoid heavy taxes, after the State Council announced five new policies to limit the real estate market on March 1.

The main driver of this phenomenon is the controversial 20 percent tax on capital gains from sales of second homes, aimed at curbing the property boom, according to reports by state-owned and other Chinese media. 

Under the new rules, primary residences owned for more than five years are exempt from taxes when sold. 

Couples with two houses can divorce, sell a house as a primary residence, avoid tax on the sale, and then remarry, according to Shanghai Daily. 

Since the new policy announcement, divorce rates have shot up in Shanghai, Guangzhou, Suzhou, and several other large cities.

Southern China’s Guangzhou City saw a higher than usual divorce rate on March 5 and March 6. Divorces more than doubled in Tianhe District on March 5, but most of the couples planned to remarry after selling one of their houses, the Guangzhou-based Information Times reported. 

People rushed to divorce in Shanghai on March 4 and March 5, according to Shanghai Daily. A marriage registration office director surnamed Yin said, “We have never seen so many couples seeking a divorce in a single day.” 

On March 4, there were 294 divorces in Nanjing City in the eastern coastal province of Jiangsu, which is twice the average number. Some people applied for a “Certificate of Single Status” as soon as they filed for divorce, according to a report by Modern Express.  

Director Xia of a district marriage registration office said the divorcing couples all seemed to be in a hurry. “Some openly admitted that they were divorcing for the sake of their houses,” he told Modern Express.

In northern China’s Heilongjiang Province, a district Civil Affairs Bureau official in Harbin City said they processed 30 to 40 divorce cases, three to four times the average number, on March 5, Helongjiang News reported. 

A woman surnamed Sun told Heilongjiang News that she faked her divorce to avoid taxes, and plans to remarry her husband. 

Professor Xie Baisan of the School of Management in Fudan University in Shanghai, blogged that the new taxes are too high and will cause many fake divorces.

He used an example of an apartment near the campus of Fudan University, with a market value of 4.5 million yuan (about US$725,000). The tax bill after selling such an apartment would be around 900,000 yuan ($144,802), whereas a divorce only costs 70 yuan (US$11) and to remarry costs another 70 yuan. 

“If they save up to 900,000 yuan, people can give it to their parents, pay for doctor visits for their children, or send their kids to study abroad,” he said, “That’s why many people will choose to file a fake divorce.” 

Xie therefore urged the State Council to immediately halt the new policy to slow the divorce rate. 

Translation by Li Zhen. Research by Jane Lin.

Read the original Chinese article. 

Chen Yilian
Chen Yilian