As we all know, foreigners are restricted to purchase real estate property in China. Now if your spouse is a local Chinese person (take Shanghai as example, you have a Shanghai husband or wife), now you can buy as many property as you wish so long as you have sufficient cash.

A couple of days ago, China National Administration of Taxation issued a new circular saying that where a spouse turns his or her pre-marriage real property into community property or co-owned properties by adding the other spouse's name on the title deed, deed tax is exempted. Under an old circular, deed tax is also exempted if a co-owned maritial real property is agreed to be owned by one spouse upon divorce.

Given that, a foreigner that cannot buy property is now able to buy as many as he or she wants by doing the following:

Assuming a foreigner that is not qualified to buy a property at all is married to Shanghainese who has one or more apartments, during marriage, they can apply to transfer all the properties into the name of foreign spouse without paying any taxes. If the foreign spouse wants more properties, he or she can then have a divorce after all the properties are transfered under his or her name, then his or her Shanghainese spouse will be eligible to buy at least one house again since there is no property in the name of the local spouse. After the local spouse buys new property, they can then marry each other again. By repeating the process, this foreigner can buy as many as he or she wants. Of course, I have not taken into account the foreign exchange and mortgage loan issues.

Does it sound interesting?

The foreigner is the only winner in this game, so no Chinese spouse in their right mind would ever play.

Doroto wrote:As we all know, foreigners are restricted to purchase real estate property in China.

Does not it said "Foreigners only can buy one flat in China after 1 year stay" ?



Does we OBLIGATED to feed one Shanghinese for that ?

tylerdurden wrote:The foreigner is the only winner in this game, so no Chinese spouse in their right mind would ever play.

There is no worry about this. To protect the local spouse, she or he can first draw up an agreemetn with the foreign spouse stipulating that (1) the divorce is fake; (2) all properties shall belong to both spouses and (3) after re-marrying, the name of local spouse shall be added again to the title deed of all properties.

I think I saw a discussion that if, you want to own more property as foreigner, you should do it as a company.. of course the economics changes drastically.

Also.. I wonder how many of these restrictions are China wide and how many are more localized in the province or city you are buying.

X501 wrote:

Doroto wrote:As we all know, foreigners are restricted to purchase real estate property in China.

Does not it said "Foreigners only can buy one flat in China after 1 year stay" ?



Does we OBLIGATED to feed one Shanghinese for that ?

Yes, it is so said. But to obtain title by way of transfer between spouses is not "buy", and therefore not subject to restriction.

Michael wrote:I think I saw a discussion that if, you want to own more property as foreigner, you should do it as a company.. of course the economics changes drastically.

Also.. I wonder how many of these restrictions are China wide and how many are more localized in the province or city you are buying.

Purchasing properties via a company is almost impossible for foreigners. What kind of companies are you going to incorporate? I was approached before by an foriegn investors inquiring exactly the same question. I found no solution. Also, buying residential properties via companies will be subject to heavier taxes compared with individuals.

Doroto wrote:

tylerdurden wrote:The foreigner is the only winner in this game, so no Chinese spouse in their right mind would ever play.

There is no worry about this. To protect the local spouse, she or he can first draw up an agreemetn with the foreign spouse stipulating that (1) the divorce is fake; (2) all properties shall belong to both spouses and (3) after re-marrying, the name of local spouse shall be added again to the title deed of all properties.

If the chinese spouse tried to use the agreement that stated the divorce was fake then it seems to me that they would both run the risk of imprisonment for tax evasion.

I think what you say makes sense and it sounds right. However, couples that trust each other 100% wouldn't need to go through this as they would be happy with jointly owned property and couples that don't trust each other 100% would run the risk that the foreign spouse would run off with the property. So I'm not sure what kind of person would benefit.

[quote="TaxBeagle If the chinese spouse tried to use the agreement that stated the divorce was fake then it seems to me that they would both run the risk of imprisonment for tax evasion.

I think what you say makes sense and it sounds right. However, couples that trust each other 100% wouldn't need to go through this as they would be happy with jointly owned property and couples that don't trust each other 100% would run the risk that the foreign spouse would run off with the property. So I'm not sure what kind of person would benefit.[/quote]

Hi TaxBeagle, i don't see a risk of tax evasion, as title transfered between spouses are exempted from taxes. When they buy new homes, they will pay due taxes as normal transaction.

As mentioned, the couple can finally make all properties as co-owned by adding both names on each property. The risk of one spouse losing property can be well mitigated to nil.

Well, I write this for fun actaully. Lawyers are fond of finding loopholes in laws. If the property market were still bullish, this approach may prove very effective and valuable for foreign investors to tap property market.

Doroto wrote:

TaxBeagle wrote: If the chinese spouse tried to use the agreement that stated the divorce was fake then it seems to me that they would both run the risk of imprisonment for tax evasion.

I think what you say makes sense and it sounds right. However, couples that trust each other 100% wouldn't need to go through this as they would be happy with jointly owned property and couples that don't trust each other 100% would run the risk that the foreign spouse would run off with the property. So I'm not sure what kind of person would benefit.

Hi TaxBeagle, i don't see a risk of tax evasion, as title transfered between spouses are exempted from taxes. When they buy new homes, they will pay due taxes as normal transaction.

As mentioned, the couple can finally make all properties as co-owned by adding both names on each property. The risk of one spouse losing property can be well mitigated to nil.

Well, I write this for fun actaully. Lawyers are fond of finding loopholes in laws. If the property market were still bullish, this approach may prove very effective and valuable for foreign investors to tap property market.

The transfer of property to the spouse via a fake divorce would still potentially result in a criminal prosecution wouldn't it? I see what you mean about the tax evasion part, but it would still potentially be a criminal offence .... some kind of fraud (I don't know the criminal code very well)?

overh20 wrote:This isn't really a new concept.

If an expat is married, they can always purchase a property jointly with their Chinese spouse thus avoiding the usual restrictions placed upon expats.

This is not new. Many chinese people buy property in this way. The new thing here is that with new taxation rules, it is more doable since there will be no deed taxes. As you may notice, without the clear tax rules, deed taxes were indeed imposed in some cities.

TaxBeagle wrote:The transfer of property to the spouse via a fake divorce would still potentially result in a criminal prosecution wouldn't it? I see what you mean about the tax evasion part, but it would still potentially be a criminal offence .... some kind of fraud (I don't know the criminal code very well)?

No, there won't be criminal risks.