MOF / STA / MOHURD Officials Answer Press Questions on Real Estate Market Tax Policies

财政部 税务总局 住房城乡建设部有关司负责人就促进房地产市场平稳健康发展税收政策答记者问

Source (Chinese): STA Policy Database — 政策解读 (November 13, 2024)

English translation: Independent translation. Not an official government translation.

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To implement the decisions and deployments of the CPC Central Committee and the State Council and promote stable and healthy development of the real estate market, the Ministry of Finance (MOF), the State Taxation Administration (STA), and the Ministry of Housing and Urban-Rural Development (MOHURD) recently issued the Announcement on Tax Policies to Promote Stable and Healthy Development of the Real Estate Market. The STA also issued the Announcement on Lowering the Minimum Land Appreciation Tax (LAT) Pre-levy Rate. Both are effective from December 1, 2024. Officials from the MOF's Tax Policy Division, the STA's Property and Behavioral Tax Division and Goods and Services Tax Division, and the MOHURD's Real Estate Market Supervision Division answered press questions.

Q1: What is the main background for adjusting the real estate market tax policies?

Answer: The CPC Central Committee attaches great importance to the stable and healthy development of the real estate market. The Third Plenary Session of the 20th Central Committee proposed that relevant cities be allowed to abolish the distinction between ordinary and non-ordinary housing standards, and to improve the real estate tax system. The Political Bureau of the Central Committee emphasized the need to promote stabilization of the real estate market, to promptly improve land, fiscal and tax, and financial policies, and to promote the construction of a new development model for real estate.

To implement the decisions and deployments of the CPC Central Committee, it is necessary to clarify how the VAT and land appreciation tax (LAT) preferential policies linked to the abolition of ordinary and non-ordinary housing standards shall be connected, and in light of the current real estate market conditions, to further adjust and optimize relevant tax policies, increase support, and promote stable and healthy development of the real estate market.

Q2: What adjustments have been made to the real estate market tax policies?

Answer:

1. Increasing deed tax concessions in housing transactions and lowering the LAT minimum pre-levy rate. This actively supports rigid and improvement-oriented housing demand of residents and alleviates financial difficulties of real estate enterprises.

   Deed tax: The floor area threshold for the 1% reduced tax rate has been raised from 90 square meters to 140 square meters. It is also clarified that Beijing, Shanghai, Guangzhou, and Shenzhen may apply the same deed tax concession policies for second family homes as other regions. After the adjustment, nationwide, for individuals purchasing a family's sole home or a family's second home, as long as the floor area does not exceed 140 square meters, deed tax shall be uniformly levied at the rate of 1%.

   Land appreciation tax: The minimum LAT pre-levy rate across all regions has been uniformly lowered by 0.5 percentage points. Each region may adjust its actually implemented pre-levy rate based on local conditions.

2. Clarifying VAT and LAT preferential policies linked to the abolition of ordinary and non-ordinary housing standards, reducing second-hand housing transaction costs and maintaining stable tax burdens for real estate enterprises.

   VAT: After relevant cities abolish the distinction between ordinary and non-ordinary housing, individuals selling a residence that has been held for 2 years or more (inclusive) shall be uniformly exempt from VAT. The previous rule requiring VAT on the sale of non-ordinary housing held for 2 years or more (inclusive) by individuals in Beijing, Shanghai, Guangzhou, and Shenzhen shall correspondingly cease to apply.

   Land appreciation tax: In cities that have abolished the ordinary and non-ordinary housing distinction, the exemption from LAT for taxpayers constructing and selling ordinary standard housing where the value-added amount does not exceed 20% of deductible items shall continue to apply.

Q3: What are the main contents of the adjusted deed tax concession policies for housing transactions? How should taxpayers apply for the concessions?

Answer:

1. Policy content. For individuals purchasing a family's sole home (family members include the purchaser, spouse, and minor children, the same hereinafter), where the floor area is 140 square meters or less, deed tax shall be levied at a reduced rate of 1%; where the floor area exceeds 140 square meters, deed tax shall be levied at a reduced rate of 1.5%.

   For individuals purchasing a family's second home, where the floor area is 140 square meters or less, deed tax shall be levied at a reduced rate of 1%; where the floor area exceeds 140 square meters, deed tax shall be levied at a reduced rate of 2%. A "family's second home" refers to the second home purchased by a family that already owns one home.

2. Application procedures. Taxpayers applying for tax concessions shall submit family member identification documentation and a written inquiry result on the taxpayer's family housing status issued by the real estate administration department at the location of the purchased property to the competent tax authority. Where inter-departmental information sharing is available, taxpayers may authorize the competent tax authority to obtain the relevant information through information sharing; where information sharing is not available and taxpayers cannot submit the relevant documentation, taxpayers may apply under the commitment-based verification system as prescribed, submit the corresponding Tax Certificate Informed Commitment Letter, and bear legal responsibility for the truthfulness of the commitment.

   Specific operational procedures shall be formulated by the finance, tax, and real estate administration departments of each province, autonomous region, and municipality directly under the central government.

   To allow more taxpayers to enjoy the policy benefits: for individuals who purchase housing and declare and pay deed tax after December 1, 2024, as well as those who purchased housing before December 1, 2024 but declare and pay deed tax after December 1, 2024, the newly issued announcement shall apply if they meet the prescribed conditions.

Q4: What are the main contents of the VAT preferential policies linked to the abolition of ordinary and non-ordinary housing standards?

Answer: In Beijing, Shanghai, Guangzhou, and Shenzhen, wherever the ordinary and non-ordinary housing distinction has been abolished, the unified national VAT policy for individual housing sales shall apply after abolition. For individuals who sell a residence that has been held for 2 years or more (inclusive) in these cities, VAT shall be exempt.

The relevant provisions in Article 5, Paragraph 1 and Paragraph 2 of Appendix 3, Transitional Policy Provisions for the Pilot Program of Replacing Business Tax with VAT, of the Notice of the Ministry of Finance and the State Administration of Taxation on Comprehensively Launching the Pilot Program of Replacing Business Tax with VAT (Caishui [2016] No. 36) shall correspondingly cease to apply.

For individuals who sell housing before December 1, 2024 and have not yet declared and paid the applicable VAT, the newly issued announcement shall apply if the conditions are met.

Q5: What are the main contents of the LAT preferential policies linked to the abolition of ordinary and non-ordinary housing standards?

Answer: In cities that have abolished the ordinary and non-ordinary housing distinction, pursuant to Article 8, Item 1 of the Provisional Regulations of the People's Republic of China on Land Appreciation Tax, taxpayers who construct and sell ordinary standard housing where the value-added amount does not exceed 20% of deductible items shall continue to be exempt from LAT.

Pursuant to Article 11 of the Implementing Rules of the Provisional Regulations of the People's Republic of China on Land Appreciation Tax, the specific implementation standards for relevant cities shall be determined by the people's governments of the respective provinces, autonomous regions, and municipalities directly under the central government. After the specific implementation standards are published, projects for which the tax authority newly accepts a settlement declaration, and projects for which a settlement declaration has been accepted but no settlement audit conclusion has been issued before publication of the standards, shall be processed under the newly published standards. Projects for which a settlement audit conclusion has been issued before the standards are published shall continue to be processed under the original standards.

Q6: What are the main contents of lowering the minimum LAT pre-levy rate?

Answer: Consistent with China's real estate development model, LAT operates under a pre-levy system. To give full play to the regulatory role of LAT pre-levying, the STA issued a circular in 2010 specifying minimum pre-levy rates for each region: 2% for eastern regions, 1.5% for central and northeastern regions, and 1% for western regions.

This adjustment uniformly lowers the minimum LAT pre-levy rate for all regions by 0.5 percentage points. After the adjustment: eastern regions are 1.5%, central and northeastern regions are 1%, and western regions are 0.5%.

Q7: What measures will the tax authorities take to facilitate taxpayers' enjoyment of the preferential policies?

Answer: To ensure that taxpayers promptly enjoy the benefits of the tax concession policies, the tax departments will work with relevant departments to adopt a series of measures, continuously optimize tax services, and improve taxpayer satisfaction.

1. Further improving service window efficiency. Following the announcement, local tax departments will rely on the "single-window acceptance" model for real estate registration and tax processing to further optimize offline window arrangements and online processing workflows, providing homebuyers with "one-stop" services for tax payment and certificate processing as a "one thing, one visit" experience. Additionally, tax departments will set up additional service windows and extend operating hours as needed to serve taxpayers.

2. Further optimizing document submission methods. Continuing to strengthen inter-departmental collaboration and information sharing, using shared information for data pre-filling to reduce taxpayers' documentation and form-filing burden. Where information sharing is not available and taxpayers cannot submit the relevant documentation, taxpayers may choose to apply under the commitment-based verification system as currently prescribed.

3. Further strengthening policy communication and interpretation. Local tax departments will work with relevant departments to provide professional policy interpretation and tax processing consultation services to taxpayers through dedicated guidance positions at tax service halls and the 12366 taxpayer service hotline, based on local conditions. They will respond promptly to taxpayer concerns to ensure orderly tax processing. At the same time, various media channels will be used for policy communication and interpretation to create a favorable tax business environment.