Surge in Chinese couples divorcing and then remarrying to exploit tax loophole

There has been a surge in Chinese couples getting divorced and then remarrying to exploit a tax loophole.

Twice as many divorced couples are remarrying in China's Shanghai to avoid property taxes and 30% of all marriages in Nanjing were divorced couples tying the knot again.

In 2013, China applied a 20% capital gains tax on the profits owners make from selling residential property, part of efforts to clamp down on rampant speculation and property prices that were soaring at the time.

But the authorities left a gaping hole in the fiscal system: the terms let couples with two properties sell them tax-free under certain conditions if they divorced and put each house into one person's name - after which they could get back together.

An avalanche of divorces

The policy triggered "an avalanche of divorce cases in many cities nationwide", the China Daily reported.

A total of 17,286 divorced couples remarried each other in Shanghai last year, according to official data. In 2012, before the changes, the figure was only 8,068, the report said.

Similar increases have been seen in cities including the Jiangsu provincial capital, Nanjing, as residents retied the knot "after taking advantage" of the loophole, the China Daily said.

In Nanjing, nearly 25,000 divorced couples reunited last year, making up nearly 30% of total marriages, the city's Yangtse Evening Post wrote in January.

"The extraordinary surge in the remarriage rate shows that a large proportion of those who divorced did so in the fake way," Ming Li, deputy director of the China Marriage and Family Counselling Centre told the daily.

"Some divorcing couples would bring parents and children along when they filed for separation, she explained, "as if the entire family was attending a joyful event".