My family is new in Taipei, and we’re looking for an apartment. We found one we liked, but the rental agreement included this clause:
“The rent excludes tax. The Tenant has agreed not to report this contract to the government. The Landlord will guarantee the Tenant monthly rent NTD 38,500 as long as there is no violation of [this clause]. Violation of this term will lead the Tenant to cover all the tax differences (12% on top of the monthly rent). Once this clause is accepted, there will be no objection from Tenant.”
My wife and I are both American lawyers, and we thought there was something shady about this clause, so we didn’t sign, and we’re back to looking for a place.
Is this clause typical in Taiwanese rental agreements? It seems odd to request a written agreement to keep facts hidden from the government. I would imagine that signing such an agreement could even get the renter in trouble with the government.
So did we dodge a red flag, or is this just the way things are done around here? Any comments are welcome.
You should know that NT$38,500 is well above the average for a monthly rental in New Taipei. I assume it is a very modern and well furnished place. Also note that English rental agreements are fairly uncommon.
Basically, the landlord (lady?) wants to lease the place without reporting the income, as I’m sure you could tell. This is quite common, but for foreigners it can create a big headache because we need to register an address with the immigration authorities. To prove your address, you use your housing contract, and if your housing contract explicitly says you can’t tell the authorities… well, you get the picture. That being said, interagency communication isn’t great, so there’s a good likelihood immigration will never tell the tax office, but you never know.
The practice of landlord asking not reporting your rent as deductible is SOP. To have it in written form is unheard of. It is usually an unspoken understanding between tenant and owner. Owner benefits from no taxation, tenant pays less rent. You would need a receipt to apply for tax deduction and that one is as rare as a blue Formosan crane. But yes, there are landlords that do pay their taxes and give receipts.
That said, the apartment must have been state of the art and close to an MRT. Two month is the legal deposit.
As lawyers, you will find out the murkiness of law and it’s application on this Island fascinating, mystifying… or downright exasperating. Pick your battles accordingly.
That would totally depend on the size and condition etc. of the apartment. As has been noted it would have to be pretty nice for this kind of rent.
I would say this is standard practice here. Generally who will pay the tax on an apartment rental is agreed upon beforehand, formally or informally. For a residence it usually isn’t an issue, but if the apartment is used for a business reported to the tax authorities, this issue will come into play. I’ve never found that it became an issue because of reporting your address to the immigration authorities; maybe someone here can correct me if I’m wrong. My most recent rental agreement had such a clause.
Sure, I bet there are some lush apartments in that price range. I’d want a large split level flat for that kind of cash. It might be worth the money, or it could be a local landlord jacking up the rent for a foreigner. Without seeing pics we don’t know.
The agreement is unenforcable, that is all there is to it. Law school 101.
Contracts are illegal and thus entirely void if the performance or formation of the agreement will cause the parties to engage in activity that is illegal. Besides, the landlord always owes tax to the government regardless of the rental agreement. That is an obligation to the government unaffected by a contract with a third party.
I thought as I was typing my first post, that there’s probably a section in the rental market where rents are very high. But the clause in the contract might be a red flag. The whole thing didn’t feel right on a gut level, but I could be wrong.
Seems like my landlord wants me to do roughly the same thing… What was the rough conclusion here? (sorry, 5 years late…)
I’m fine with my landlord doing whatever they want in terms of taxes - if they get caught it’ll be their problem - but as a foreigner, I’m very wary of doing something like tax avoidance and putting my job, apartment, ARC, etc. in potential jeopardy. How sketchy is this actually?
Okay, I see. Classic Taiwanese.
Even as a foreigner reporting everything to the government for my ARC and stuff, do I have to worry about getting caught? What happens if I do get caught? Is this a pay-a-fine situation, or a get-kicked-out-of-apartment-and-potentially-Taiwan situation? (Is it even illegal or just a gray area?)
You could deduct rent from your taxes, but in that case the landlord would have to report the rent income and pay taxes on it. It’s not a matter of you getting in trouble, it’s a matter of your rights being infringed on by a greedy landlord.
Funnily enough. They deducted most of my taxes anyways for ‘Living expenses’ this year. They just picked a number and I ran with it. I didn’t rat out the landlord.
My landlord wants me to not report my rent to the government. This way he can give me a lower price (so he says).
I’m a little unclear on how this all helps him, as he talks fast and likes to use fancy Mandarin grammar that I don’t understand, and my Taiwanese friend doesn’t know any of the rental laws. But if he gives me lower rent, then he makes less money, so doesn’t it come out about even (amount saved by dodging taxes - rent discount)? Why go to all the trouble?
