Divorces of (Real-Estate) Convenience in China

♠ Posted by Emmanuel in , at 5/06/2013 01:00:00 PM
To paraphrase Steely Dan, this is not your Haitian but your Hainan divorce. Recent regulations in China intended to tamp down real-estate speculation have had an unintended consequence of separating happily married couples to take advantage of better tax benefits accruing to single persons:
Long queues of happy couples waiting to get married might be a common sight in Las Vegas. But lines of happily married couples waiting to get divorced? Only in China. In major cities across the country last month, thousands of couples rushed to their local divorce registry office to dissolve their marriages in order to benefit from fast-expiring tax breaks on property investments for unmarried individuals.

Local media reported long waits at registries in Beijing, Shanghai, Guangzhou and elsewhere as savvy investors sought to buy or sell a second home before the government introduced strict new regulations that would force married homeowners to pay hefty taxes on the sale of second properties.

The new regulations are designed to cool speculation in China’s feverish property market and are part of a package of measures that would require couples to pay up to 20% capital gains tax on the sale of second homes. But for determined investors, nothing gets in the way of a good bargain, and some quickly noticed that the 20% impost didn’t apply if the second home was bought before the couple were married — or after they got divorced.
It seems the authorities have caught on, though, and singles are increasingly unable to take advantage of the breaks sought after by the divorcees-of-convenience:

The divorce solution is extreme but it’s the kind of solution to which China’s put-upon middle classes have become accustomed...Of course, the country’s regulators have also taken notice of the long queues outside divorce registries and have acted to put a stop to the practice. In recent weeks, the government revised its regulations to increase the taxes payable by unmarried individuals selling a secondhand property, effectively cutting the most speculative investors out of the market.
Don't you just love it when marriage, profitology and authoritarianism collide?