Confusing remarks are being made on this and other threads about this new bill.
It will not levy a new 5% tax on bank deposits, nor will it bring a 3% increase on your yearly property taxes. This should be clear to all; so no, a run on the banks is not near and real estate property prices will not plummet when the bill is enacted into law (expected before the end of 2018).
What the bill does is offer taxpayers a 9-month period to: a. declare unreported assets; or, b. reassess the value of those which were undervalued at the time of their acquisition.
The law includes other assets, but for the sake of this thread I will stick to 3 simple and practical examples on bank deposits and real estate. The figures below are, of course, quick estimates made to better illustrate the most common cases. There are also a number of ifs and hows for which we will all have to wait until the law is enacted and the Tax Office issues its application ruling. If you currently do not have a trusted tax advisor on call this is the perfect time to begin looking for one.
1. Bank deposits:
Say you had a US$100,000 DR-taxable income in the past and never declared it. These funds are sitting on a savings bank account or CD either locally or abroad.
This new law will allow you to voluntarily declare this income within the 9-month period after the bill is enacted, by paying a one-time 5% tax on the total declared amount, i.e., US$5,000, instead of the 25,000 you would have had to pay if you fell under the 25% income tax bracket.
2. Unregistered real estate:
15-25 years ago, you purchased a house for US$200,000 and for one reason or the other it has never been registered at the Tax Office (you have never paid a penny on real estate transfer nor annual property taxes). The Tax office has yet not given you notice to register it and pay the last 3 years of back taxes and fines.
The new law will allow you to voluntarily register the property at the Tax Office within said period with the payment a one-time 3% tax based on the value of your purchase. All back taxes will be eliminated. After its registration, the standard 1% property tax will be due yearly thereon based on this registered value.
3. Undervalued registered real estate :
You purchased your house back in 2010 for US$500,000, but at the Tax Office you registered a deed of sale with a purchase value of US$200,000, and ended up effectively paying US$6000 for your 3% title transfer taxes.
If you were to sell the property today for say 700,000, you would get hit with a hefty capital gains taxes bill close to US$108,110 (~15% effective tax rate of the transaction value).
The new bill would allow to increase your acquisition base up to the actual price paid for the property, by paying 3% on the real purchase price, minus what you effectively paid for title transfer taxes when the undervalued price was declared:
500,000 x 3%: 15,000 - 6000 = US$9,000.
So, instead of a capital gains tax bill of 108,110, you will end up paying a mere 7,775.
