"Measures for Handling Enterprise Income Tax for Real Estate Development and Operation Business" (GuoShifa [2009] No. 31) stipulates that losses caused by the state's free recovery of land use rights can be deducted before tax as property losses in accordance with relevant regulations. Article 27 stipulates that the taxable cost expenditure of developing products - land expropriation fee and demolition compensation fee refer to various expenses incurred in order to obtain the land development and use right (or development right), mainly including land purchase price or transfer fee, municipal supporting fee, deed tax, cultivated land occupation tax , land use fee, land idle fee , land change purpose and over-area compensation, land compensation for relocation, resettlement and relocation expense, relocation housing construction expense, crop compensation for dangerous housing, etc.
Handling of land value-added tax
The State Administration of Taxation "Notice on Issues Related to Land Value-added Tax Liquidation" (State Tax Letter [2010] No. 220) stipulates that the idle land expenses paid by real estate enterprises overdue development shall not be deducted.
Differences in land value-added tax and corporate income tax treatment of idle land
According to the relevant provisions of the "Enterprise Income Tax Law of the People's Republic of China", idle land sluggish fees can be included in the tax calculation cost of developing products and can be deducted before tax. Losses caused by the state's free resumption of land use rights can also be deducted before tax as property losses. However, the State Taxation Letter [2010] No. 220 document clearly states that the idle land payment paid by real estate enterprises overdue development shall not be deducted when liquidating land value-added tax. Therefore, when real estate enterprises clear land value-added tax, they can no longer calculate the land cost according to the corporate income tax.
