What Is a Land Value Tax?

Land value-added tax refers to units and individuals that transfer state-owned land use rights, buildings on the ground and their attachments and obtain income. The value added is a tax paid to the state on the basis of taxation, excluding the act of transferring real estate for free by inheritance or gift. Taxpayers are units and individuals that transfer the right to use state-owned land and the property rights of buildings and other attachments on the ground and obtain income. The taxation object refers to the value-added obtained from the paid transfer of state-owned land use rights and the property rights of above-ground buildings and other attachments. The value-added amount of land price refers to the balance of the income obtained from the transfer of real estate minus the prescribed real estate development costs and expenses. The land value-added tax is subject to a four-level super-rate progressive tax rate. Land value-added tax is actually anti-real estate windfall profits tax. It refers to the units and individuals of real estate operating companies and individuals that transfer paid use of state-owned land and the income obtained in the process of housing sales. A tax that is paid proportionally to the state. At present, China s land value-added tax is subject to a four-level progressive tax rate. It is more levied on high land appreciation rates, less levied on low value-added rates, and non-levied without value-added. For example, the value-added amount is greater than 20% and less than 50%. If the added value exceeds 30%, the tax will be levied at a rate of 60%. According to expert estimates, as long as the gross profit rate of real estate projects reaches more than 34.63%, land value-added tax is required. ^[1]

Land value added tax

tax rate

Land value added tax is the income obtained from the transfer of real estate, minus the amount of statutory deductions.

Compared with other taxes, land value-added tax has the following four characteristics:

The levy of land value-added tax has an extremely important role:

(1) It is conducive to strengthening the state's

Taxpayers : Units and individuals who transfer the right to use state-owned land and the property rights of buildings and other attachments on the ground and obtain income.

The taxable object refers to the paid transfer of state-owned

The formula for calculating land value-added tax is: payable land value-added tax = value-added amount × tax rate

1. The "value added" in the formula is the balance of the income obtained by the taxpayer after deducting the amount of the project from the transfer of real estate .

The taxpayer's income from the transfer of real estate includes currency income, in-kind income and other income.

Calculate deductions for value added:

(1) The amount paid to acquire the land use right;

(2) Costs and expenses of land development;

(3) Costs and expenses of new houses and ancillary facilities, or assessed prices of old houses and buildings;

(4) Related to the transfer of real estate

An enterprise shall set up a detailed account of "Land VAT payable" under the "Taxes payable" account, which is used to calculate the occurrence and payment of land VAT. It reflects the land value-added tax actually paid by the enterprise, and the balance reflects the land value-added tax that the enterprise should pay but did not pay.

Land value-added tax as a levy on business income

Income diversification planning

According to the relevant tax laws, the value-added amount of land is the balance of the income obtained by taxpayers after transferring real estate minus the amount of deductible items. In the case of a certain deducted project amount, the less the transfer income, the smaller the land appreciation amount. Of course, the tax rate and

State Council Order [1993] No. 138

Date of promulgation: 19931213 Date of implementation: 19940101 Issued by: State Council

Article 1 These Regulations are formulated in order to regulate the order of land and real estate market transactions, reasonably adjust the land value-added income, and safeguard national rights and interests.

Article 2 Assignment

Land value-added tax The State Administration of Taxation issued the "Notice on Relevant Issues Concerning the Management of Land Value-added Tax for Real Estate Development Enterprises". What kind of impact the government's move will have on the property market, various domestic media have expressed their views.

Intended to curb irregular behavior

Hong Kong"

Land value added tax exemption

1. Statutory tax exemption. Under any of the following circumstances, land value-added tax is exempted:

(1) The taxpayer builds and sells ordinary standard dwellings, and the added value does not exceed 20% of the deducted project amount;

(2) Real estate requisitioned and recovered in accordance with law due to national construction needs.

Article 8 of the "Interim Regulations of the People's Republic of China on Land Value Added Tax"

2. Transfer of real estate is exempt. In case of relocation due to the needs of city planning and national construction, the original real estate shall be transferred by the taxpayer by itself, and shall be exempted from land value-added tax upon examination by the tax authority.

Article 11 of the Implementation Rules of the Interim Regulations on Land Value-added Tax of the People's Republic of China

3. The transfer of self-use housing is exempt. Individuals who transfer their original homes for work transfer or improvement of living conditions will be exempted from land value-added tax if they have lived for 5 years or more; land value-added tax will be reduced by half if they have lived for 3 years and less than 5 years.

Article 12 of the Implementation Rules of the Interim Regulations on Land Value-added Tax of the People's Republic of China

4. Real estate shares are exempt from tax. If real estate is used to invest in shares or associates, the real estate transferred to the invested or associated enterprise is exempted from land appreciation tax.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

5. Cooperation in building self-use houses is exempt. For one party to land and one party to fund, the two parties cooperate to build a house, and after the completion of the construction, the house will be temporarily allocated for land use tax exemption.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

6. Exchanging real estate is exempt from tax. Individuals who exchange their own real estate for residence shall be exempted from land appreciation tax upon verification by the local tax authorities.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

7. Real estate transfer is exempt. For real estate transfer contracts signed before January 1, 1994, VAT is exempted whenever the real estate is transferred.

"Notice on Levying and Exempting Land Value-added Tax for Real Estate Signing Development and Transfer Contracts Before January 1, 1994" (Caifa Zi [1995] No. 7)

8. Real estate transfer is exempt. Real estate development contracts that have been signed or subdivided before January 1, 1994, and have been invested in development in accordance with regulations, and those who transfer real estate for the first time are exempt from land value-added tax before the end of 2000.

Notice of the Ministry of Finance and the State Administration of Taxation on the Extension of Preferential Policies for Land Value-added Tax (Caishui Zi [1999] No. 293)

9. Individual transfer of ordinary residence is exempt. From August 1, 1999, the transfer of ordinary dwellings owned by individual residents is temporarily exempted from land value-added tax.

Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting Several Tax Policies for the Real Estate Market (Caishui Zi [1999] No. 210)

10. There is no tax on gifts of real estate. Property owners and land use rights owners who donate property rights or land use rights to their immediate family members or those who bear direct maintenance obligations are not subject to land value-added tax.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

11. Property donations are not taxed. Property owners and land use rights owners who donate property rights and land use rights to education, civil affairs and other social welfare and public welfare undertakings through non-profit social organizations and state agencies in China are not subject to land value-added tax.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

12. Asset management companies are exempt from tax on transferring real estate. For the four asset management companies and their branches of China Cinda, Huarong, Great Wall and Dongfang, from the date of establishment, the company disposes of non-performing assets and the income from the transfer of real estate is exempt from land value-added tax.

Notice of the Ministry of Finance and the State Administration of Taxation on the Tax Policies of China Cinda and Four Financial Asset Management Companies (Caishui [2001] No. 10)

13. The income from the 29th Olympic Games is exempt from tax. The organizing committee of the 29th Olympic Games re-sells the donated items and the assets transferred after the game to obtain income, and is exempt from land value-added tax.

Notice of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs on the Tax Policies for the 29th Olympic Games (Caishui [2003] No. 10)

14. The debt cancellation of the cancelled financial institution is tax-free. From the effective date of the Regulations on the Revocation of Financial Institutions, exempted financial institutions and their branches (excluding their affiliated enterprises) are exempted from transferring goods, real property, intangible assets, securities, Land value added tax due on bills, etc.

Notice of the Ministry of Finance and the State Administration of Taxation on the Relevant Tax Policies of Cancelled Financial Institutions (Caishui [2003] No. 141)

15. Asset disposal is exempt. China Eastern Asset Management Corporation shall be exempt from land value-added tax when it receives assets from Hong Kong and Macau International (Group) Co., Ltd. and uses the assets to engage in financial leasing business. The assets of Hong Kong, Macau International (Group) Co., Ltd., their mainland companies and eight Hong Kong subsidiaries in China are exempted from land value-added tax when they are liquidated and disposed of.

Notice of the Ministry of Finance and the State Administration of Taxation on China Eastern Assets Management Corporation's Disposal of Assets Tax Policies of Hong Kong and Macau International (Group) Co., Ltd. (Caishui [2003] No. 212)

16. Land value-added tax is not levied if property rights are not transferred. When a real estate development enterprise transfers part of the real estate developed for its own use or for commercial purposes such as lease, if the property rights have not been transferred, no land value-added tax will be levied, no income will be included in the tax settlement, and the corresponding costs and expenses will not be deducted.

Notice of the State Administration of Taxation on the Relevant Issues concerning the Management of Land Value Added Tax Clearance of Real Estate Development Enterprises (Guo Shui Fa [2006] No. 187)

17. Land value-added tax pre-collection rate. For the situation in accordance with Article 7 of the Notice of the State Administration of Taxation on the Issues concerning the Management of Land Value-added Tax Liquidation of Real Estate Development Enterprises, the local tax bureaus of the provinces and municipalities may determine a collection rate not lower than the pre-collection rate within the range specified below , And report to the provincial bureau for the record:

(1) For ordinary standard dwellings constructed by real estate development enterprises, land value-added tax may be levied at 0.5% to 1% of the income obtained;

(2) For ordinary residences constructed by real estate development enterprises, land value-added tax may be levied at 1% to 2% of the income obtained;

(3) For business houses, office buildings, high-rise apartments, resorts, villas, etc. constructed by real estate development enterprises, land value-added tax may be levied at 2% to 4% of the income obtained;

(4) For projects built by real estate development enterprises that include ordinary standard residences, ordinary residences or other commercial houses, their income shall be accounted for separately; otherwise, land value-added tax shall be levied from 2% to 4% of the income obtained from high.

Notice of the Jiangsu Local Taxation Bureau on Forwarding the "Notice of the State Administration of Taxation on the Relevant Issues concerning the Management of Land Value-added Tax Liquidation of Real Estate Development Enterprises" (Su Di Shui Fa [2007] No. 75)

18. Provisions on deductions for transfer of old main houses and buildings. For units transferring old main houses and buildings, which neither evaluate the price nor provide house purchase invoices, 80% to 95% of the transfer income is used as a deduction for the amount of land value-added tax. The specific proportion is determined by the provinces and cities. Report to the Provincial Department of Finance and the Provincial Land Tax Bureau for the record.

Notice of the Jiangsu Provincial Department of Finance and the Jiangsu Local Taxation Bureau on Forwarding the Ministry of Finance and the State Administration of Taxation on Several Issues of Land Value Added Tax (Su Caishui [2007] No. 45)

19. Individuals who transfer non-common dwellings for more than five years are exempt. For individuals transferring non-ordinary residences, that is, without assessing the price and not providing a purchase invoice, land value-added tax is calculated based on 1% to 1.5% of the transfer income. The specific proportion is determined by the provincial municipalities and reported to the provincial finance department and provincial land tax Bureau of Records.

For individuals transferring non-ordinary dwellings, after applying for approval to the competent tax authority, land value-added tax will be exempted for those who have lived for five years or more; if they have lived for three years and less than five years, land value-added tax will be reduced by half.

20. Low-rent housing and affordable housing are exempt from land value-added tax in accordance with regulations. Enterprises, institutions, social organizations, and other organizations that transfer old houses as low-rent housing, affordable housing, and the added value does not exceed 20% of the deducted project amount are exempted from land value-added tax.

Notice of the Ministry of Finance and the State Administration of Taxation on the Tax Policies for Affordable Housing and Housing Leasing for Low-rent Housing (Caishui [2008] No. 24)

21. Land value-added tax is exempted for the construction and transfer of post-disaster reconstruction housing. The land used for the construction of residential houses constructed by the government for the affected residents is exempted from urban land use tax and is exempt from land value-added tax when transferred.

Notice of the Ministry of Finance and the General Administration of Customs and the State Administration of Taxation on Tax Policy Issues in Support of Recovery and Reconstruction after the Wenchuan Earthquake (Caishui [2008] No. 104)

22. Individual sales of houses are temporarily exempted from land value-added tax. Effective November 1, 2008, land sales tax will be temporarily exempted for individual sales of housing.

Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Tax Policies for Real Estate Transactions (Caishui [2008] No. 137)

23. After the real estate development enterprise has liquidated the land value-added tax, if it is temporarily difficult to pay the tax, it can be postponed after approval.

"Notice of Jiangsu Local Taxation Bureau on Seriously Implementing Tax Preferential Policies to Support the Development of Small and Medium-sized Enterprises" (Su Di Shui Fa [2009] No. 3)

24. The income of the organizing committees of the three international comprehensive sports games is tax-free. From January 1, 2008, the income from the transfer of assets after the Games by the Organizing Committee of the Asian Games, the Executive Committee of the Universiade and the Organizing Committee of the Winter Games will be exempted from the business tax and land value-added tax payable.

Notice of the Ministry of Finance and the General Administration of Customs and the State Administration of Taxation on the Tax Policies for the Three International Comprehensive Games, including the 16th Asian Games (Caishui [2009] No. 94)

25. Land value-added tax is exempted for enterprises, institutions, social organizations and other organizations that transfer old houses as public rental housing listings and the added value does not exceed 20% of the deducted project amount. The public rental housing that enjoys this tax preferential policy refers to the public rental housing development plans and annual plans approved by the people's government of the province, autonomous region, municipality, single-planned city and Xinjiang Production and Construction Corps, and in accordance with the "Guide to Accelerating the Development of Public Rental Housing" Opinions "(Jianbao [2010] No. 87) and specific administrative measures formulated by the municipal and county people's governments for the management of public rental housing.

Land value added tax deduction

1. Statutory tax deductions. The following items are allowed to be deducted by the taxpayer when calculating the land value added tax:

(1) The amount paid to acquire the land use right. That is, the land price paid by the taxpayer to obtain the land use right and the relevant fees paid in accordance with the unified national regulations;

(2) Cost of land development, new houses and ancillary facilities. It refers to the actual cost of the taxpayer's real estate development project. Specifically includes: land acquisition and demolition compensation fees, upfront engineering costs, construction and installation engineering costs, infrastructure costs, public supporting facilities costs, and development overhead costs;

(3) Expenses for land development, new houses and ancillary facilities. Includes selling expenses, management expenses and financial expenses related to real estate development projects. (Referred to as real estate development costs)

Interest expenses in financial expenses are calculated at a rate not exceeding the interest rate of a similar loan of a commercial bank for the same period and deducted according to the actual situation. Other real estate development expenses are deducted based on 5% of the sum of the payment of land use rights and the actual costs of real estate development projects.

Where it is not possible to calculate the apportioned interest expenses based on real estate projects or provide financial institution certification, real estate development expenses shall be deducted within 10% of the sum of the amounts specified in (1) and (2) of this article;

(4) Valuation of old houses and buildings. It refers to the price multiplied by the replacement discount rate assessed by the real estate appraisal agency confirmed by the tax authority;

(5) Taxes related to the transfer of real estate. Refers to the business tax, city maintenance and construction tax, stamp tax and education surcharge paid when transferring real estate;

(6) Other deductions required by the Ministry of Finance. Refers to the taxpayer engaged in real estate development, which can be deducted by 20% according to the sum of the amount of land use right payment and the actual cost of real estate development project in accordance with item (1) and (2) of this article.

Article 6 of the "Interim Regulations of the People's Republic of China on Land Value Added Tax", Article 7 of the "Implementation Rules of the Interim Regulations of the People's Republic of China on Land Value Added Tax"

2. Deduction for fees. For the people's governments at or above the county level, all the fees collected by real estate development enterprises in the era of house sales, which are included in the house price and collected from the purchaser, can be counted as tax on the transfer of real estate income, and the amount of the deducted items should be calculated accordingly. Deducted at time. However, it shall not be used as the base for the deduction of 20%.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

3. Deduction of land price and taxes. For the transfer of old houses, the value-added tax of the houses and buildings, the land price paid for obtaining the right to use the land, the relevant fees paid by the state and the taxes paid during the transfer shall be used as a deduction for the amount of land value-added tax. . If the land use right is not paid or the proof of the paid land price cannot be provided, the amount of the land price shall not be deducted.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)

4. Deduction of assessment costs. The assessment fee paid by the taxpayer for the transfer of old houses and buildings can be deducted in real terms when calculating the value added.

Notice of the Ministry of Finance and the State Administration of Taxation on Some Specific Issues concerning Land Value Added Tax (Caishui Zi [1995] No. 48)