Recently, the Ministry of Finance and the State Administration of Taxation jointly issued the "Land Value-Added Tax Law of the People's Republic of China (Draft for Comments)", elevating the "Regulations" to law and soliciting public opinions from the public. The end time is August 15.
Regarding the feasibility and necessity of formulating the Land Value-Added Tax Law this time, the Ministry of Finance and the State Administration of Taxation believes that the legislation of land value-added tax is an important step in implementing the principle of statutory tax, and is also an important part of improving the reform of the local tax system. It is conducive to improving the land value-added tax system, enhancing authority and law enforcement rigidity, giving full play to the role of land value-added tax in raising fiscal revenue, regulating the distribution of land value-added income, and promoting the healthy and stable development of the real estate market, which is conducive to improving my country's real estate tax system.
Li Yujia, chief researcher of the Guangdong Provincial Housing Policy Research Center, pointed out that land value-added tax has always been in operation under the provisional regulations, which is the "Interim Regulations on Land Value-added Tax of the People's Republic of China" issued in December 1993. Recently, the "Land Value-added Tax Law" has begun to solicit opinions publicly. The Land Value-Added Tax Law basically translates the current " Interim Regulations on Land Value-Added Tax ", and the scope of tax collection, tax calculation methods, tax rates, etc. remain basically unchanged. However, compared with the Interim Regulations, a lot of new content has been added.
At present, there is a voice in the market that "whether individuals need to pay land value-added tax when selling houses."
In response to this, Wang Huayu, deputy director of the Finance and Taxation Law Research Center of Shanghai Jiaotong University, said that for individuals, land value-added tax will not be levied in principle, and the Draft for Soliciting Opinions will not make major adjustments.
Personal housing is not currently levied
Land value-added tax is a tax paid by taxpayers when transferring state-owned land use rights, above-ground buildings and their attachments and obtaining certain value-added income. Compared with the "Interim Regulations on Land Value-added Tax" and the "Land Value-added Tax Law" that solicits opinions from the outside, there is no big difference in the expression of the scope of collection.
Li Yujia said that according to the previous provisions of the "Interim Regulations on Land Value-added Tax" and the implementation rules, the land value-added tax for real estate development enterprises will be pre-collected at the time of sale and liquidated at the end of the project, and the pre-paid tax will be refunded or compensated. Personal housing has not been included in the implementation.
China Index Academy's policy research report pointed out that for individuals, land value-added tax is not currently levied, and the solicitation of opinions has not made any additional explanation. In the future, it is still necessary to further clarify in light of the overall tax reform, but the main direction is not to increase the overall tax burden.
However, in Li Yujia's view, at present, for enterprises and individuals, land or real estate may be the main wealth, but there has never been appropriate tax laws to regulate and regulate. Land value-added tax has always been in operation under the provisional regulations, that is, the "Interim Regulations on Land Value-added Tax of the People's Republic of China" in December 1993. Later, based on the practice of encouraging development investment and moderate suppression, the Interim Regulations on Land Value-added Tax issued another implementation rule. This detailed rules adopt the implementation principles of simple calculation, moderate deduction, and the inclusion of personal housing. The purpose is to adapt to housing reform and housing consumption, and encourage developers to purchase land and development and sales, and enterprises and individuals to buy houses and property.
In the future, the transfer of existing land and real estate will be the dominant market. Land value-added tax legislation is not only conducive to standardizing collection and management, but also to curb land asset speculation, inhibit capital flow into the real estate market, and avoid developers hoarding land and accelerating land development and sales. In addition, for individuals, in addition to the provisions on reducing or exempting land value-added tax based on economic and social development needs (such as ordinary housing with a value-added amount not exceeding 20% of the deduction of the project), owning multiple houses, large apartments and luxury houses may also be subject to land value-added tax.
Li Yujia believes that the growth of space value and supporting public services contribute the most, owners benefit a lot, and they are not the income from their own efforts, so they should be adjusted through taxes, which is the same as the "tax adjustment principle" of property tax.
So what are the differences between this land value-added tax legislation and the "Interim Regulations" implemented before, and what impact will it have on the real estate industry?
Include buildings and attachments that transfer collective land use rights in the tax scope
The biggest difference between this draft for soliciting opinions and the previous interim regulations is that the buildings and attachments that transfer collective land use rights will be included in the tax scope. At the same time, it is planned to cancel the land appreciation income adjustment fund currently levied on collective real estate.
The Ministry of Finance and the State Administration of Taxation issued an explanation that the main consideration for adjusting the scope of taxation is to connect with land system reform . In order to implement the requirements of the Third Plenary Session of the 18th CPC Central Committee, in 2014, the General Office of the CPC Central Committee and the General Office of the State Council clearly required the establishment of a system for entering the market for collective commercial construction land (hereinafter referred to as collective construction land), and required the establishment of a land value-added income distribution mechanism that takes into account the state, collective and individuals to reasonably increase personal income. Since 2015, 33 pilot areas across the country have carried out three reform pilot projects: rural land acquisition, collective construction land entry into the market, and homestead land system reform, allowing collective construction land to enter the market and transfer, and implementing the same market entry as state-owned construction land, with the same rights and prices. At present, pilot areas adjust land value-added income through the transitional method of expropriating land value-added income adjustment funds. The amendment to the Land Administration Law has been submitted to the Standing Committee of the National People's Congress for initial review, and the provisions that state-owned land must be used or expropriated as state-owned original collective land has been deleted. In order to establish a land value-added income distribution mechanism and connect the tax system with the reform of the land system to establish a unified urban and rural construction land market, the "Draft for Comments" includes collective real estate in the scope of taxation. At the same time, it plans to abolish the land value-added income adjustment fund to make the overall stability of the collective real estate burden before and after the legislation.
The tax system of the real estate industry will be more perfect
The China Index Academy report believes that the Land Value-Added Tax Law will elevate the Interim Regulations to the Law’s tax system for the real estate industry will be further improved to help build a long-term mechanism. The tax statutory of the real estate industry has been further promoted, including the Land Value-Added Tax Law for soliciting opinions this time, and the Real Estate Tax Law that is currently brewing, will work together to have a lasting impact on the real estate industry, thereby stabilizing the expectations of market entities and jointly preventing land hoarding, land speculation, and housing hoarding. At the same time, given that the tax law specifically gives the State Council and local governments a certain amount of decision-making space, this will enable the established tax system in the real estate industry to be applied more flexibly in the real estate market regulation process.
For real estate companies, the financial pressure has increased. From the perspective of overall financial pressure, the previous collection system regulations were relatively extensive, leaving a certain amount of flexible operation space for real estate companies. The latest draft for soliciting opinions clearly stipulates the tax payment period and collection management methods. Although this has little impact on the cost of tax payment (the policy emphasizes that the tax burden will remain stable in the short term), it compresses the operation space of the company and the overall financial pressure has increased. Judging from the changes in the expectations of real estate companies to acquire land, the back-end tax payment policy has changed, and the difficulty of strengthening tax planning has increased. The way companies calculate the land investment and acquisition at the front-end will change accordingly, and the expectation of land prices will cool down. Judging from the differentiated impacts of different real estate companies, the adjustment of land value-added tax has a significant impact on developers with large land reserves, long development cycles and large product premiums, and has a smaller impact on fast-turnover enterprises. In addition, tax preferential policies have increased the decision-making authority of local governments. In the future, enterprises will face differentiated tax preferential treatment in different regions and business categories, and in-depth research is needed. Overall, the further regulation of tax policies will further promote the pattern of strong people in the real estate industry being strong, and companies that have strong financial strength and can achieve scale growth under low profit margins will be more competitive.
further improves the local tax system
Industry view believes that for local governments, the local tax system can be further improved, the collection and management will be stricter, and the tax source is more stable, becoming an important tax type that will exist for a long time in the future.The land value-added tax has been a dispute over the years, and the previous appearance of the provisional regulations is also based on uncertainty in practice. At present, the rise from regulations to laws shows that land tax increases will become an important tax that will exist for a long time in the future, and will pay more and more attention to it in the future. The corresponding supervision will become more and more standardized, and the punishment or protection of relevant entities will be stricter. According to the data, land value-added tax has grown steadily in recent years. The proportion of the four major taxes in the real estate industry to the total tax paid by value-added tax (before the VAT reform was business tax), income tax, deed tax and land value-added tax were 35.22%, 17.41%, 15.26% and 18.46% respectively (China Tax Yearbook, 2015). Land value-added tax accounts for a high proportion, and the adjusted land value-added tax has become a more stable source of local tax.
Li Yujia pointed out that over the past 20 years, the scale of my country's land value-added tax revenue has continued to expand. According to data released by the Ministry of Finance, the revenue of land value-added tax reached 564.2 billion yuan in 2018, an increase of 14.9% year-on-year. Revenue in the first quarter of this year was 166.7 billion yuan, a year-on-year increase of 14.7%.
