2024/03/04 Commissions earned from the trading of real estate brokerage should be declared for the filing of th

The National Taxation Bureau of Taipei, Ministry of Finance, expressed that commissions earned by individuals from real estate brokerage are classified as “Category 2 – Income from Professional Practice” as specified in Paragraph 1 of Article 14 of the Income Tax Act; and that the said revenue should be included in the gross consolidated income for the purpose of levying consolidated income tax. 

The Bureau explained that, in real estate brokerage transactions, both the seller and buyer or one of the parties will pay commissions to the real estate brokerage at a specific proportion of the trading price according to market trading practice. If the individual who earns the commission is unable to provide relevant expense certifications to verify the deduction, they may calculate necessary expenses based on 20% of the commissions according to the "Professional Practice Expense Standards (General Agent)" established by the Ministry of Finance. They should deduct these necessary expenses from the commissions and include the remaining amount as the total consolidated income for filing income tax.

The Bureau provides the following example: Mr.A sold a real estate property in 2020 for NT$100,000,000. After receiving this amount, Mr.A paid a commission of 2% of the sale price, which is NT$2,000,000, to the brokerage agent, Mr.B. However, during the declaration of consolidated income tax for 2020, Mr.B failed to include this revenue in the income for that year. After the Bureau revealed it, Mr.B then asserted that relevant expense certificates were not preserved. Consequently, the Bureau calculated necessary expenses as NT$400,000, which is 20% of the NT$2,000,000 commission. The Bureau then determined Mr.B's income from professional practice for 2020 to be NT$1,600,000. As a result, Mr.B was not only required to pay the outstanding tax amount but also faced penalties according to Paragraph 1 of Article 110 of the Income Tax Act.

The Bureau would like to remind all citizens that commissions earned by individuals from real estate brokerage should be declared for the filing of consolidated income. Those who fail to declare and pay taxes on these commissions should make a supplementary declaration and pay the missed tax, along with any accrued interest, to their local national taxation bureau as soon as possible, before the competent tax collection agency discovers it, to avoid penalties.

(Contact person: Head of the Comprehensive Income Tax and Estate and Gift Tax Section Lin, Tel: 2311-3711 Ext.1530)