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According to the spirit as embodied in the Interim Regulation of the People's Republic of China on Land Value-added Taxes (hereinafter referred to as the Regulation) and the detailed rules for implementation thereof as well as the relevant provisions, we hereby clarify the relevant issues regarding land value-added taxes as follows: I. TAX COLLECTION AND EXEMPTION IN THE SALE OF ORDINARY STANDARD RESIDENTIAL HOUSES BUILT BY TAXPAYERS AND THE TRANSFER OF ORDINARY RESIDENTIAL HOUSES BY INDIVIDUAL RESIDENTS The term "ordinary standard residential houses" as prescribed in Article 8 of the Regulation and the term "ordinary residential houses" as prescribed in Article 3 of the Circular of the Ministry of Finance and the State Administration of Taxation on Adjusting the Tax Policies for the Real Estate Market (No. 210 [1999] of the Ministry of Finance), the standard for the term of "small or medium-sized ordinary residential houses at moderate and low prices" as formulated and publicized to the general public by the people's government of a province, autonomous region or municipality directly under the Central Government according to the Circular of the General Office of the State Council on Forwarding to the Ministry of Construction and Other Departments the Opinions on Doing a Good Job in Stabilizing the Real Estate Price (No. 26 [2005] of the General Office of the State Council). Where any taxpayer builds ordinary residential houses as well as other commercial houses, the amount of added value on land shall be verified respectively. Before the day when this document is publicized, as to any application for tax exemption for ordinary standard residential houses that has been filed to the tax authority at the locality of the real estate, especially any ordinary standard residential houses which has been given the treatment of exemption from land value-added taxes upon examination according to the standards for ordinary standard residential houses as determined by the people's government of a province, autonomous region or municipality directly under the Central Government, no adjustment shall be retroactively made. II. CALCULATION UNDER THE ITEM OF DEDUCTION IN THE TRANSFER OF OLD HOUSES A taxpayer who transfers any old house or building, in case fails to obtain the assessed price but is able to provide the house purchase invoice, the amount under the item of deduction as prescribed in items (1) and (3) of Article 6 of the Regulation may, upon the recognition of the local tax authority, be calculated according to a compound interest rate of 5% on an annual basis for a term spanning from the year of purchase to the year of transfer. With regard to the deed tax due when a taxpayer purchases a house, where the relevant deed tax payment certificate can be presented, it may be deducted as "tax relating to the transfer of real estate" but shall not be included into the base corresponding to the compound interest rate of 5%. For the transfer of any old house or building, in the case of no relevant assessed price or house purchase invoice, the local tax authority may, according to the provisions of Article 35 of the Law of the People's Republic of China on Tax Collection and Administration (hereinafter referred to as the Tax Collection and Administration Law), conduct tax collection upon verification. III. ADVANCE COLLECTION OF LAND VALUE-ADDED TAXES AND THE SETTLEMENT All regions shall further improve the measures for the advance collection of land value-added taxes, and decide the advance collection rate in a scientific and reasonable manner, and adjust it at a proper time according to the value addition level of the real estate as well as the market development level within the region and on the basis of the specific house categories, namely, ordinary houses, non-ordinary houses and commercial houses. After a project is completed, the relevant settlement shall be handled in a timely manner, with any overpayment refunded or any underpayment being made up. For any tax that fails to be collected in advance within the advance collection term, the late fees shall be collected additionally as of the day following the expiration of the prescribed advance collection term according to the relevant provisions of the Tax Collection and Administration Law as well as its detailed rules for implementation. For any real estate project that has been completed and gone through the acceptance as well, where the floor area of the real estate as transferred makes up 85% or more in the salable floor area, the tax authority may require the relevant taxpayer to conduct the settlement of land value-added taxes on the transferred real estate according to the matching principles regarding the proportion between the income as generated from the transfer of real estate and the amount under the item of deduction. The specific method of settlement shall be prescribed by the local tax authority of a province, autonomous region, municipality directly under the Central Government, or a city under separate state planning. IV. TAX COLLECTION AND EXEMPTION FOR THE REAL ESTATE AS TRANSFERRED BY A TAXPAYER HIMSELF DUE TO THE RELOCATION AS REQUIRED IN THE IMPLEMENTATION OF URBAN PLANNING OR STATE CONSTRUCTION Paragraph 4 of Article 11 of the Detailed Rules for Implementing the Interim Regulation of the People's Republic of China on Land Value-added Taxes, which prescribes that: "The relocation made for 'the Implementation of urban planning'" refers to the relocation whereby the reconstruction of an old city or enterprise pollution perturbs the people (produces excessive waste gases, waste water, waste residues or noises, so that the life of urban residents is affected to a certain degree) and thus the government or the relevant administrative department of the government decides and thereafter carries out the relocation according to the urban planning that has been examined and approved. The "relocation as required by state construction" refers to a situation wherein relocation is required for the purpose of implementing any construction project that has been approved by the State Council, a provincial people's government, or the relevant ministry or commission of the State Council. V. TAX COLLECTION AND EXEMPTION FOR INVESTMENT OR ASSOCIATION BY MEANS OF THE REAL ESTATE For any investment or association by using land (real estate) as payment for the purchase of shares, where an enterprise involved in the investment or association engages in the real estate development or where any other real estate development enterprise makes investment or conducts association with the commercial houses it itself builds, it shall not be governed by Article 1 of the Circular of the Ministry of Finance and the State Administration of Taxation on the Provisions on Some Specific Issues regarding Land Value-added Taxes (No. 048 [1995] of the Ministry of Finance) on the interim exemption of land value-added taxes. VI. OTHER The present Circular shall come into force as of March 2, 2006. |
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