Shanghai saw a rush of people seeking a divorce over the past two days as couples worked out a way to escape the looming 20 percent tax on the profit from house sales.

Couples in rush to divorce as house sales tax looms

Created: 2013-3-6 1:46:08, Updated: 2013-3-6 1:54:53

Author:Hu Min

Shanghai saw a rush of people seeking a divorce over the past two days as couples worked out a way to escape the looming 20 percent tax on the profit from house sales.

Marriage registrars confirmed that the dramatic surge was triggered by the central government’s property curbs announcement last week, with many couples seeking a quick divorce but a remarriage shortly after.

Houses bought more than five years ago as a seller’s only residence are exempt from tax when resold. But families who own two houses and want to sell one of them are now targets in the government’s bid to curb speculation in the property market. If the couples divorce, each spouse will then own a property and one of them can sell the apartment that is tax exempt. After the transaction is complete, the couples get married again. The registration center in Zhabei District saw a record 53 divorces yesterday, its director surnamed Yin said. “We have never seen so many couples seeking a divorce in a single day, and by 2pm the number had already surpassed the previous high of 42 couples,” he said.

The impact of the tax policy on “fake” divorces is even more obvious this time compared with other policies, such as couples wanting to get round restrictions on buying a second home, Yin said.

The number of people who applied for proof they are single, which is required in many property transactions, is also on the rise. The center dealt with more than 250 cases yesterday, also setting a record compared with the usual 60 to 70.

“We are badly exhausted,” Yin said.

The center had opened half an hour earlier yesterday to cope with the crowds.

An official at the registration center in Yangpu District said a pregnant woman was among the people asking for a divorce.

“She told me she came here to avoid possible loss in the property transaction, and I could say nothing,” the official said.

The center usually handles around 10 divorces a day on average, but the figure doubled on Monday and yesterday, the first working days since the announcement.

The official said some couples pretended they “lacked mutual affection,” a common term cited in China’s divorce cases, but others were forthcoming about needing a divorce to avoid the tax.

“I told all of them to come here again for remarriage registration as soon as their transaction is finished,” he said.

A man surnamed Zhang said he was looking to sell a second home and his wife had suggested they divorce. “Divorce is the easiest way, and I will remarry her once the transaction is finished.”

The Changning District registration center said its divorce figure soared nearly 30 percent on Monday.

The Shanghai Civil Affairs Bureau declined to give a figure for divorces across the city.

“We fear that media reports would provide a solution on the issue and ‘lure’ more people to the trick,” said Lin Kewu, deputy director of the bureau’s marriage administration. But he admitted the rise in the number of divorces was the result of the tax plan.

However, He Zhanbiao, the administration’s director, warned that some people might be taking a risk. Some men might trick their wives into getting a divorce using the tax as an excuse. But they might have a mistress and truly want a divorce, He said.

Meanwhile, real estate trade centers across the city also witnessed long queues.

At the Pudong New Area’s real estate trading center, hundreds of people lined up outside waiting to complete transactions. Inside, it was standing room only and police were on hand to keep order.

An estate agent said several of her clients were eager to sell because of the tax. Some were even willing to drop their price.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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