Laws of the People's Republic of China

   Article 2 The transfer of the right to use a tract of State-owned land, and property right of buildings and the attached installations thereon stated in Article 2 of the Regulations refers to the sale or other paid transfers of the real estate. It does not include the transfer of a real estate through inheritance or donation without compensation.

   Article 3 The State-owned land stated in Article 2 of the Regulations refers to land defined as such by the State Law.

   Article 4 The buildings mentioned in Article 2 of the Regulations refer to all buildings constructed on the land, including all kinds of auxiliary installations above and under ground.

The attached installations mentioned in Article 2 of the Regulations refer to all installations on the land which cannot be removed and will be damaged once removed.

   Article 5 The income stated in Article 2 of the Regulations refers to all the prices and related proceeds received for the transfer of the real estate.

   Article 6 The units stated in Article 2 of the Regulations refer to all kinds of enterprises, institutions, government organs, social groups and other organizations.

The individuals mentioned there include self-employed business people.

   Article 7 The items to be deducted from the land added-value in calculation as stipulated in Article 6 of the Regulations are as follows:

1. The lease price paid for the use of the land refers to the amount paid by the taxpayer for obtaining the land-use right and related expenses paid according to State regulations.

2. The costs and expenses spent in land development and construction of new buildings and auxiliary installations (hereinafter referred to as real estate development for short) refer to the real costs borne by the taxpayer for the land development project (hereinafter referred to as costs of real estate development for short). The costs include compensation fees for land requisition, the dismantling of buildings and the evacuation involved, expenses for pre-construction engineering, construction and installation, infrastructural projects and supplementary public utilities and expenses indirectly related to the development project.

The compensation fees for land requisition, dismantling buildings and evacuation include fees for land requisition, the occupation of farmland, the resettlement of labour force, the net expenses incurred as compensation for dismantling and removing the attached items above and under ground, and fees for arranging houses for evacuation and resettlement.

Pre-construction engineering expenses include expenses for planning and design, feasibility studies, hydrological and geological research, surveys and mapping, and for building electricity, running water and gas supply projects for the construction site and ensuring smooth road transport.

The construction and installation expenses include expenses on construction and installation paid to building teams which have contracted for the development project and also such expenses paid for self-managed development project.

Expenses for infrastructural projects include 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 building supplementary public utilities include expenses for building those supplementary public utilities in the development area which can not be paid transferred.

Expenses indirectly involved in the development project refer to expenses directly used for organizing and managing 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 used for evacuation and resettlement.

3. Expenses for land development, construction of new buildings and auxiliary installation refer to the selling expenses, management fees and financial expenses related to the real estate development project.

The expenditure for paying the interests of financial expenses can be deducted in full provided that it can be calculated and taken as items involved in the transfer of the real estate and is confirmed by certificates of financial institutions. But the total amount of the interests must not exceed the total calculated according to commercial bank loans of the same type and for the same term. The other expenses for real estate development to be deducted must be kept within five percent of the total cash value calculated according to Item 1 and Item 2 of the present article.

As for those expenses whose interests cannot be calculated and taken as part of the expenses of the real estate transfer and cannot be proved by certificates of financial institutions, those expenses for real estate development must be kept within ten percent of the total cash value calculated according to Item 1 and Item 2 of this article, and are to be calculated and deducted thereof.

The exact ratios to be deducted in the above-stated calculations are to be decided by the governments of the related provinces, autonomous regions and municipalities.

4. The evaluated prices of old houses and buildings refer to their replacement prices evaluated at the time of transfer by real estate appraisal organizations established with the approval of the government. Depreciation funds are to be deducted from the replacement prices with the discount rates decided by the well-preserved state of the houses and buildings that have already been used. The prices evaluated have to be confirmed by the tax authorities.

5. Taxes related to the transfer of the real estate refer to the business tax, tax on the maintenance of municipal buildings and stamp duty delivered during the transfer. The educational surtax paid on the transfer can also be taken as part of the taxes involved and deducted.

6. According to Item 5 of Article 6 of the Regulations, a taxpayer engaged in a real estate development project is allowed a 20% deduction from the total cash value calculated according to Item 1 and Item 2 of this article.

   Article 8 The calculation of the value-added tax on a tract of land is to be made by taking the most basic accounting item of the cost accounting for the real estate, or the object of accounting, as the unit accounting.

   Article 9 Whereas a taxpayer who has received the right to use a tract of land, has the land developed plot after plot by stages and has transferred part of the real estate, the part of the cash value to be deducted from the tax payment can be calculated according to the proportion of the land-use right to be transferred to the total area of this tract of land, or according to the proportion of the area covered by buildings, or by other methods confirmed by the tax institution.

   Article 10 With regard to the four-level progressive tax rates listed in Article 7 of the Regulations, the percentages of difference between the added-value of the land and the total cash value of the deducted items at each level are included in the following formulae:

In computing the value-added tax on the land, the following simple method of calculation can be used for quick computation, i.e.: the added value times a practical tax rate and then minus the cash value of the deducted items multiplied by a coefficient. The concrete formulae are as follows:

1. Whereas the amount of the added value of the land does not exceed the cash value of the items to be deducted by 50%, the value-added tax on the land = the added value * 30%;

2. Whereas the added value of the land exceeds the cash value of the items to be deducted by 50% but by less than 100%,

The value-added tax on the land = the added value * 40% the cash value of the items to be deducted * 5%;

3. Whereas the added value of the land exceeds the cash value of the items to be deducted by 100% but by less than 200%,

the value added tax on the land = the added value * 50% - the cash value of the items to be deducted * 15%;

4. Whereas the added value of the land exceeds the cash value of the items to be deducted by 200% or more,

the value-added tax on the land = the added value * 60% - the cash value of the items to be deducted * 35%.

The 5%, 15% and 35% in the formulas are the deduction coefficients used for quick calculation.

   Article 11 The ordinary standard houses defined in Item 1 of Article 8 of the regulations refer to residential buildings constructed according to the standards of local ordinary residential buildings. The residential buildings of ordinary standards do not include high-class apartment houses, villas and holiday villas. The concrete yardsticks for distinguishing ordinary-standard residential buildings from other buildings are to be decided by the people's governments of the related provinces, autonomous regions and municipalities under the direct jurisdiction of the central government.

A residential building of ordinary standards constructed by a taxpayer for sale, provided that its added value does not exceed the total cash value of the items to be deducted listed in Items 1, 2, 3, 5 and 6 of these rules by 20%, shall be exempted from the land value-added tax. In case that the added value of the ordinary-class residential building exceeds the total cash value of the items to be deducted by 20%, the taxpayer is required to pay a tax calculated according to the full added value in line with the Regulations.

A real estate to be requisitioned or retrieved according to the Law out of the needs of national construction as stipulated in Item 2 of Article 8 of the Regulations refers to a housing estate or its land-use right requisitioned or retrieved by the government in line with the requirements for implementing municipal plans and national construction.

The real estate transferred by a taxpayer on his (her) own accord in comply with the needs of implementing municipal plans and national construction are exempted from the land value-added tax in line with the stipulations.

The organizations and individuals that conform to the stipulated tax- exemption rules are required to submit applications for tax exemption to the tax institutions in the areas where their real estates are located. They will be exempted from the land value-added tax after their applications are examined and checked.

   Article 12 An individual who transfers the house he (she) owns and inhabits owing to the transfer of his (her) work or the improvement of living conditions will be exempted from the land-value added tax after his (her) tax-exemption application is examined and checked by the tax authorities provided that he (she) has lived there for five years or more. If he (she) has lived there for over three years but less than five years, the land value-added tax will be reduced by half. For an individual who has lived there for less than three years, the land value-added tax will be calculated and levied according to the stipulations.

   Article 13 The evaluated prices of the real estates mentioned in Article 9 of the Regulations refer to the prices evaluated by real estate appraisal organizations set up with the approval of the government by referring to the same type of real estates in the same locality according to comprehensive standards. The evaluated prices must be confirmed by local tax institutions.

   Article 14 Concealment or falsification in reporting the transaction price of a real estate transfer mentioned in Item 1 of Article 9 of the Regulations refers to the taxpayer's conduct of not declaring or intentionally understating the price for the transfer of the land-use right and the buildings and attached objects on the land.

Untrue reporting of deducted items mentioned in Item 2 of Article 9 of the Regulations refers to the taxpayer's false declaration, without conforming to the real facts, of the cash value of the deducted items at the time of declaration for tax payment.

The case of the transaction price being lower than the evaluated price without justifiable reasons as mentioned in Item 3 of Article 9 of the Regulations refers to the condition that the real transaction price reported by the taxpayer for the transfer of the real estate is lower than the transaction price evaluated by the real estate appraisal organization with the taxpayer not being able to provide proofs or justifiable reasons.

In case of the concealment or falsification of the transaction price of a real estate, the price should be evaluated by the appraisal organization by referring to the market price for the transaction of the same type of real estates. The tax authorities then determine the income received for the transfer of the real estate on the basis of the evaluation.

Whereas the cash value of the deducted items declared is false, the appraisal institution should evaluate their cash value by referring to the base costs of the house given a discount according to the degree of its well-preserved state, and also to the base price of the land at the time of obtaining the land-use right. The tax institution then determines the cash value of the deducted items according to the evaluated price.

Whereas the reported transaction price for the transfer of a real estate is lower than the evaluated real estate price and no justifiable reasons are provided, the tax institution shall determine the income from the real estate transfer on the basis of the evaluated price.

   Article 15 According to Item 10 of the Regulations, a taxpayer is required to pay the tax according to the following procedure:

1. Within seven days after the signing of the contract on the transfer of a real estate, the taxpayer is required to make a declaration for tax payment at the tax department in the area where the real estate is located, and hand in certificates of the right of ownership of the house and building on the land and of the land-use right, contracts on the land transfer and the sale and purchase of the house, a report on the evaluation of the real estate and other related data on the transfer of the real estate.

Whereas the frequent transfer of real estates makes it difficult for the taxpayer to make a declaration after each transfer, he (she) is allowed to make a declaration at fixed periods, with the time-limit determined by the tax department.

2. The taxpayer is required to deliver the value-added tax on the land according to the amount examined and decided by the tax institution and within the period specified by it.

   Article 16 Whereas the taxpayer has obtained an income from the transfer of a real estate before the completion of the construction project on it and the clearing of accounts, the land value-added tax can be levied in advance since the value of the tax cannot yet be calculated for involving the determination of the costs or because of other reasons. The settlement of accounts is to be made after the construction project and the clearing of accounts are completed. The overpaid part of the value-added tax shall be returned to the taxpayer while the underpaid part shall be returned by him (her). The concrete methods will be worked out by the tax departments of the related provinces, autonomous regions and municipalities according to local conditions.

   Article 17 The location of the real estate stated in Article 10 of the Regulations refers to the area where the real estate is located. Whereas the real estate transferred by the taxpayer is located in two or more than two areas, he (she) is required to make separate tax declaration in each of the areas.

   Article 18 The related data which are required to be supplied by the land management and house property management departments to tax departments as stipulated in Article 11 of the Regulations refer to the data on the right of ownership of houses and buildings, land-use right, the cash value of land transfer, the base price of the land, the market transaction price of the real estate and the change of the right of ownership. The data shall be supplied to the tax department in the area where the real estate is located.

   Article 19 The taxpayer who does not submit the certificate of the right of ownership of houses and buildings, the certificate of land-use right, the contract on land transfer and the sale and purchase of the house property, the report on the evaluation of the real estate and other data related to the transfer of the real estate, shall be dealt with in accordance with the stipulations of Article 39 of the Regulations of the People's Republic of China on Administration of Tax Collection (hereinafter refer to as Administration of Tax Collection).

The taxpayer who does not declare the transaction price of his (her) real estate and the cash value of the deducted items which result in tax underpayment or tax evasion, should be dealt with according to stipulations of Article 40 of the Administration for Tax Collection.

   Article 20 The Renminbi is used as the basic unit in calculating the land value added tax. When the income received for the transfer of a real estate is foreign currency, it will be converted into Renminbi according to the exchange quotations published by the government on the day of payment or on the first day of the month of payment. The amount of Renminbi thus received will be used as the basis for calculating the land value-added tax to be levied.

   Article 21 The methods of collecting the land value added taxes in different areas as stipulated in Article 15 of the Regulations refer to the methods of collecting the value added taxes and proceeds on the same type of land as laid down in the Regulations.

   Article 22 The Ministry of Finance or the State Administration of Taxation is responsible for interpreting these rules.

   Article 23 The Rules are to come to force on the day of its publication.

   Article 24 The land value-added tax between January 1, 1994, and the day of the publication of the Rules will be calculated and levied with refurence to the stipulation of the Rules.