General Regulations of P. R. China Ⅻ
Article 1 These Detailed Rules were formulated according to the regulations in Article 14 of "Provisional Regulations of the People's Republic of China on Land Appreciation Tax" (hereinafter referred to simply as 'Regulations').
Article 2 'Transfer of State-owned land use rights, buildings and their attached facilities' in Article 2 of the Regulations refers to the sale or other forms of compensated transfer of real estate; it does not include the transfer of real estate through inheritance or as a gift without charge.
Article 3 'State-owned land' in Article 2 of the Regulations refers to land stipulated as such by State Law.
Article 4 'Buildings' in Article 2 of the Regulations refers to all buildings constructed on land, including all kinds of attached facilities above and below the ground.
'Attached facilities' in Article 2 of the Regulations refers to all installations on land which cannot be removed and would be damaged if removed.
Article 5 'Income' in Article 2 of the Regulations refers to all the payments and related proceeds received from the transfer of real estate.
Article 6 'Units' in Article 2 of the Regulations refers to all kinds of enterprises, institutions, government organs, social groups and other organizations.
'Individuals' in Article 2 of the Regulations includes family administration units.
Article 7 The deductible items in calculating the amount of appreciation stipulated in Article 6 of the Regulations are as set out below.
A. 'The lease price paid for the use of the land' refers to the amount paid by taxpayers to obtain the land use rights plus related expenses, according to State regulations.
B.' Costs and expenses incurred in developing the land and constructing new buildings and facilities' (hereinafter referred to simply as 'real estate development'), refers to the real costs borne by the taxpayer for development of the land project (hereinafter referred to simply as 'costs of real estate development'). These costs include compensation fees for take-over of land and the dismantling of buildings, farmland use tax and the evacuation involved, expenses for pre-construction engineering, construction and installation, infrastructure projects and supplementary public utilities and expenses indirectly related to the development project.
The compensation fees for, take-over of land, dismantling of buildings, farmland use tax and evacuation, includes fees for take-over of land, the occupation of farmland, the resettlement of labour, the net expenses incurred as compensation for dismantling and removing the attached items above and below the ground, and the fees for arranging housing for evacuation and resettlement.
'Pre-construction engineering expenses' includes expenses for planning and designing, feasibility studies, hydrological and geological research, surveys and mapping, for building electrical , gas and running water supply projects, etc. , for the construction site and for ensuring smooth road transport.
'Construction and installation expenses' includes expenses for construction and installation paid to building teams who have contracted for the development project and also expenses such as those paid for self-managed development projects.
'Expenses for infrastructure projects' includes expenses for road building, water, electricity and gas supply projects, sewage and flood water discharge projects, telecommunications , lighting installations, environmental protection and afforestation, etc. , in the development area.
'Expenses for supplementary public utilities' includes expenses for building those supplementary public utilities in the development area and for which compensation cannot be obtained.
'Expenses indirectly involved in the development project' refers to expenses directly used to organize and manage the development project, including wages, workers' fringe benefits, depreciation funds, repair funds, office expenses, fees for running water and electricity, labour protection costs and expenses for houses for evacuating and resettling people.
C. 'Expenses for land development, construction of new buildings and attached facilities' refers to the selling expenses, administration fees and financial expenses incurred in the real estate development project.
The interest costs in financing the project can be deducted in full if they can be calculated and listed as items involved in the transfer of the real estate and if they can be documented from records of financial institutions. The total amount of interest cannot exceed the total calculated with reference to commercial bank loans of the same type and for the same term. Other deductible expenses for real estate development must be kept within 5% of the total value calculated according to Item 1 and 2 of this Article.
Where interest cannot be calculated and listed as part of the expenses of the real estate transfer and cannot be documented by records of financial institutions, the expenses for real estate development must be kept within 10% of the total value calculated according to Item 1 and 2 of this Article, and are to be thus calculated.
The exact ratios to be deductible in the above shall be determined by the People's Governments of the relevant provinces, autonomous regions and municipalities directly under the Central Government.
D. The assessed value of existing buildings and constructions refers to their replacement cost assessed at the time of transfer by real estate appraisal organizations established with the approval of the Government. Depreciation is to be deducted from the replacement costs with the discount rates determined according to the state of preservation of the buildings and constructions that have already been used. The assessed costs have to be confirmed by the taxation authorities.
E. 'Taxes related to the transfer of real estate' refers to Business Tax, City Maintenance and Construction Tax and Stamp Tax paid during the transfer. The Education Fee paid on the transfer can also be taken as part of the taxes incurred, and are deductible.
F. As stipulated by Item 5 of Article 6 of the Regulations, a taxpayer engaged in a real estate development project is allowed a deduction of 20% from the total cash value calculated according to Item 1 and 2 of this Article.
Article 8 Land Appreciation Tax uses the most basic project costs or the most basic construction costs as the units of cost to calculate the real estate costs of the taxpayer.
Article 9 Where a taxpayer has received the land use rights for a tract of land, and develops and transfers the real estate by stages, the part of the land value to be deducted from tax payments can be calculated on the basis of the proportion of land transferred to total area of the tract of land, on the basis of the proportion of the tract of land covered by buildings, or by other methods approved by the taxation authorities.
Article 10 With regard to the four-level progressive tax schedule in Article 7 of the Regulations, the percentage 'by which the appreciation exceeds the cash value of the deductible items' for each level includes the percentage itself.
In calculating Land Appreciation Tax, the following simple and convenient method can be used for quick calculation: the amount of appreciation times the applicable tax rate, minus the value of deductible items, times a coefficient; the specific formulae are as follows:
A. where the amount of appreciation of the land does not exceed the total of deductible items by 50% , the Land Appreciation Tax = the amount of appreciation × 30%;
B. where the amount of appreciation of the land exceeds the total of deductible items by 50% but less than 100%, the Land Appreciation Tax = (the amount of appreciation × 40%) -(the total of deductible items × 5 % ) ;
C. where the amount of appreciation of the land exceeds the total of deductible items by 100% but less than 200% , the Land Appreciation Tax = (the amount of appreciation × 50%) -(the total of deductible items × 15%) ;
D. where the amount of appreciation of the land exceeds the total of deductible items by 200% or more, the Land Appreciation Tax = (the amount of appreciation×60%) - (the total of deductible items ×35 % ).
The 5%, 15% and 35% in the above formulae are the deduction coefficients used for quick calculation.
Article 11 ' Ordinary standard residence' in Item 1 of Article 8 of the Regulations refer to residential buildings constructed according to the standards of local ordinary residential buildings. These latter do not include high-class apartment houses, villas and holiday villas. The specific criteria for distinguishing ordinary standard residential buildings from other buildings are to be decided by the People's Governments of the relevant provinces, autonomous regions and municipalities directly under the Central Government.
An ordinary standard residential building constructed by a taxpayer for sale, provided its amount of appreciation does not exceed by 20% the total value of deductions listed in Items 1, 2, 3,5 and 6 of these Rules, shall be exempted from Land Appreciation Tax. Where the amount of appreciation of an ordinary standard residential building exceeds by 20% the total value of deductions, the taxpayer shall be required to pay a tax calculated according to the full amount of appreciation, according to Regulations.
' Real estate repossessed according to law due to the construction requirements of the State' in Item 2 of Article 8 of the Regulations refers to a housing estate or its land use rights repossessed by the Government in accordance with the requirements of implementing municipal and national construction.
The real estate transferred by a taxpayer, of his own accord," in complying with the requirements of municipal or national construction, are exempt from Land Appreciation Tax according to Regulations.
Organizations and individuals eligible for the stipulated tax exemptions are required to submit an application for such tax exemptions to the taxation authorities in the area where their real estate is located. They shall be exempt from Land Appreciation Tax after their application has been examined and approved.
Article 12 Where an individual transfers the house he owns and inhabits, because of a work transfer or an improvement in living conditions, shall be exempt from Land Appreciation Tax after his exemption application is examined and approved by the taxation authorities, and provided he has lived there for five years or more. If he has lived there over three years but less than five years, the Land Appreciation Tax shall be reduced by one half; if he has lived there less than three years, the Land Appreciation Tax shall be calculated and levied according to Regulations.
Article 13 'Assessed value of real estate' in Article 9 of the Regulations refers to the value assessed by real estate appraisal organizations set up with the approval of the Government and assessed by reference to the same type of real estate in the same locality according to overall standards. The local taxation office must confirm the assessed value.
Article 14 'Concealing or falsely reporting the actual price of real estate' in Item 1 of Article 9 of the Regulations refers to the act of a taxpayer not declaring or intentionally understating the actual price for transfer of the land use rights, the buildings and attachments on the land.
'Providing unrealistic amounts of deductions' in Item 2 of Article 9 of the Regulations refers to the act of falsely declaring amounts of deductions which do not conform to reality, when reporting deductions for tax payment.
'The transfer price of the real estate is lower than its appraised value 9 without proper justification' in Item 3 of Article 9 of the Regulations refers to the act of a taxpayer where he reports a price for the transfer of real estate which is lower than the assessed value of real estate appraisal organizations, and cannot supply documentation or does not give proper justification for the lower price.
Where the concealment or falsification of the actual price of transfer of real estate takes place, the price shall be assessed by a real estate appraisal organization with reference to the market price of the same type of real estate. The taxation authorities shall then determine the income received for the transfer of the real estate on the basis of that assessment.
Where the value of deductible items declared is unrealistic, the appraisal organizations shall assess the value by referring to the replacement cost of the buildings, discounted according to their state of preservation, and according to the base price of land at the time the land use rights were purchased. The taxation authorities shall then determine the value of the deductible items according to the assessed value.
Where the reported transfer price of the real estate is lower than the appraised value without proper justification, the taxation authorities shall determine the income from the real estate transfer on the basis of the assessed value.
Article 15 According to Article 10 of the Regulations, a taxpayer is required to pay tax following these procedures:
A. Within seven days of signing the transfer agreement for the real estate, the taxpayer is required to make a declaration for tax payment at the taxation office in the area where the real estate is located, and submit documents which show the right of ownership of buildings and constructions on the land and the land use rights, contracts on land transfer and sale and purchase of the house, a report on the assessment of the real estate and other related information on the transfer of the real estate. Where frequent real estate transfers make it difficult for a taxpayer to make a declaration after each transfer, he may make periodic declarations within a time limit determined by the taxation authorities.
B. The taxpayer is required to pay the Land Appreciation Tax according to the amount examined and approved by the taxation authorities and within the period specified by them.
Article 16 Where the taxpayer receives income from the transfer of real estate before the completion of the construction project on it and the settlement of accounts, a provisional Land Appreciation Tax shall be levied in advance if the value of the tax cannot be calculated as costs cannot be calculated or for other reasons. The settlement of accounts is to be made after the construction project and the settlement of accounts is completed. The overpayment of Land Appreciation Tax shall be refunded to the taxpayer while the underpayment shall be made good by the taxpayer. The specific methods used shall be determined by the local taxation authorities of the relevant provinces, autonomous regions and municipalities directly under the Central Government, according to local conditions.
Article 17 'Location of the real estate' in Article 10 of the Regulations refers to the area where the real estate is located. Where the real estate transferred by the taxpayer is located in two or more areas, the taxpayer is required to make separate tax declarations in each area.
Article 18 The related information which taxation authorities require from the Departments of Land Administration and Real Estate Administration, as stipulated in Article 11 of the Regulations, refers to information on the right of ownership of houses and buildings, land use rights, value of land transfers, the base price of land, actual transaction prices of real estate and changes in the right of ownership. This information shall be provided to the tax department in the area where the real estate is located.
Article 19 Where a taxpayer does not submit the documents on right of ownership of houses and buildings, certificates of land use rights, contracts on land transfer and the sale and purchase of the property, reports on the assessment of the real estate and other information related to the transfer of the real estate, he shall be dealt with in accordance with the stipulations of Article 39 of the "Law of the People's Republic of China on the Administration of Tax Administration" (hereinafter referred to simply as 'the Administrative Law').
Where a taxpayer does not declare the real price of the real estate and the value of deductions, and which results in tax underpayment or tax evasion, he shall be dealt with in accordance with the provisions of Article 40 of the Administrative Law.
Article 20 Renminbi is used as. the basic unit for calculating Land Appreciation Tax. When the income received for transfer of real estate is in foreign currency , it shall be converted into Renminbi according to the exchange rate quoted by the Government on the day of payment or on the first day of the month that payment is made. The amount of Renminbi thus calculated shall be used as the basis for determining the Land Appreciation Tax to be levied.
Article 21 'Methods of levying land Appreciation fees by various regions' in Article 15 of the Regulations, refers to the methods of levying both land Appreciation fees and benefits received from land on the tax levy objects as stipulated in these Regulations.
Article 22 These Regulations shall be interpreted by the Ministry of Finance, or by the State Administration of Taxation.
Article 23 These Detailed Rules will be implemented as of the date of promulgation.
Article 24 Land Appreciation Tax calculations shall refer to Regulations in these Detailed Rules after their date of promulgation on January 1, 1994.
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