Jul 08, 2013

    In China, it's until taxes do us part

    MARRIAGE is supposed to be for richer or for poorer, but some Chinese couples are filing for divorce or getting married to exploit loopholes in policies aimed at controlling housing prices.

    In March, the State Council announced a ruling requiring those who own more than one property to pay a 20 per cent tax on capital gains, rather than the previous 1 to 2 per cent.

    It means that couples owning two properties could avoid the high taxes if they split, with each party owning only one property after the divorce.

    The loophole triggered an avalanche of divorce cases.

    In Shanghai, the line for divorces was so long that the civil-affairs bureau had to limit the daily number of divorces.

    "I can never forget the day my parents got divorced. It's such an insult," said a Beijing resident, who wanted to be known only as Mr Huang.

    Like many families, they had planned to buy a house in a good school district as Mr Huang's son was about to start primary school. Thanks to the fake divorce, the family evaded a tax of more than 700,000 yuan (S$146,170) when they sold one of the two properties they owned - both under his mother's name.

    He said: "I've heard of couples who fake a divorce because of the new policy. But when it happened to my family, I was disturbed."

    Ms Ming Li, deputy director of China Marriage and Family Counselling centre, said: "Some couples try to seek advice from us regarding false divorces because of purchase limits and high tax in the housing market, but we always tell them not to do it, as what is supposed to be make-believe may become reality."

    It happened to a couple she counselled. The couple, in their 30s, supposedly faked a divorce and the husband stopped going home. When his former wife questioned him, he denied that the divorce was fabricated.

    He used the divorce as an excuse to be with his new partner, whom he had been having an extramarital affair with.

    "Someone will suffer from a make-believe divorce. For successful men, there may be hordes of women throwing themselves at them. When he's divorced, whether it's fake or not, the situation will be complicated," said Ms Ming.

    Ms Chen Yiyun, a marriage researcher at the Chinese Academy of Social Sciences, said: "A fake divorce may turn out to be real. If there are already problems in the marriage, one partner may seize the opportunity to sneak away."

    Mr Yang Xiaolin, a partner with Beijing Yuecheng Law Firm, said that under the law, property bought before marriage is considered as personal wealth rather than conjugal property.

    When they remarry each other, if one party doesn't want to change the property registration, the other cannot do anything about it.

    He has dealt with a case where a man who owned properties refused to remarry his former wife after a fabricated divorce, leaving her in the lurch.

    Mr Yang said: "In such cases, one can't seek legal redress. We have to publicise such cases so that people will not treat marriage as a joke."