| ESSENTIALS OF TAXES PAID BY FOREIGNERS LEASING OUT, SELLING OUT OR BUYING A PROPERTY IN CHINA | ||
| The following information is meant as a general guide only regarding taxes involved when foreigners leasing out, selling out or buying a property in China. For the latest laws and regulations regarding taxation, please contact the relevant tax authorities, or a professional tax consultant. | ||
| At present, there are six kind of taxes levied on properties owned by foreigners in China, namely, Business Tax (BT), Urban Real Estate Tax (URET), Individual Income Tax (IIT), Deed Tax (DT), Stamp Tax (ST) and Land Appreciation Tax (LAT). | ||
| As a matter of interest, below are the definitions of these taxes. | ||
| Business Tax: BT is a tax levied on specified profit-making causes and business activities. | ||
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Urban Real Estate Tax: URET is a tax levied on urban real estate. |
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| Individual Income Tax:IIT is a tax levied on the individuals. | ||
| Deed Tax: DT is a tax levied on the transferee of the property title when the land, house property title is transferred. | ||
| Stamp Tax: ST is a tax levied on the documents written, received in the economic activities. | ||
| Land Appreciation Tax: LAT is a tax levied on the appreciation from the transfer of real estates for the purpose of regulating the transaction order of real estate market and reasonably the benefit from land appreciation. | ||
| TAX IMPLICATIONS ON FOREIGNERS LEASING OUT A PROPERTY | ||
| Individual Foreign Operators | ||
| The taxes paid by individual foreign operators, who lease out a house property in China include: Business Tax, Urban Real Estate Tax, Individual Income Tax and Stamp Tax. | ||
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1-Business Tax | |
| Amount of tax payable = Rental income х 5%. | ||
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2-Urban Real Estate Tax: In accordance with the Clause 795 of Beijing Tax Administration (1998), when the owners lease out his property, the tax base shall be the original value of the property. | |
| Computation Formula: | ||
| Amount of tax payable = Original value of the propertyх 1.2% х (1-30%). | ||
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3-Individual Income Tax: Amount of tax payable = Rental income х 10% | |
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4-Stamp Tax: Rental income х 0.1%. | |
| Foreign Companies | ||
| The taxes paid by foreign companies, which lease out a house property in China includes Urban Real Estate Tax, Business Tax and Stamp Tax. | ||
| 1.Urban Real Estate Tax: Annual tax payable = Original value of the property х 1.2% х (1-30%). | ||
| 2.Business Tax: Amount of tax payable = Rental incomeх 5%. | ||
| 3.Stamp Tax: Rental income х 0.1%. | ||
| TAX IMPLICATIONS ON FOREIGNERS SELLING OUT A PROPERTY | ||
| Individual Foreign Operators | ||
| The taxes paid by individual foreign operators, who sale out a house property in China includes: Business Tax, Urban Real Estate Tax, Land Appreciation Tax and Stamp Tax. | ||
| 1.Business Tax: The turnover of the taxpayers is composed of the total consideration and all other charges received from the buyers for the sales of the house properties by the taxpayers. The applicable tax rate is 5%. Usually, the all other charges received from the buyers include commissions, fund, pool fund, payment received on behalf, payment made on behalf and others charges related to this transaction. | ||
| 2.Urban Real Estate Tax: Annual tax payable = Original value of the property х 1.2% х (1-30%) | ||
| 3.Land Appreciation Tax: The appreciation equals to the balance of proceeds received by the seller of the property on the transfer of the real estate after deducting the sum of deductible items as prescribed. The prescribed deductible items include: | ||
| (1).Costs for the transfer of real estate: For the transfer of new house property not exceeding one year, the base of deductible items shall be the original price of the property. For the transfer of real estate exceeding one year, the base of deductible items shall be the replacement cost price times the depreciation ratio based on the remaining useful life. | ||
| (2).The taxes related to the transfer of real estate, including Business Tax, City Maintenance and Construction Tax, Educational Surcharge, Stamp Tax, appraised price and exchange commissions. | ||
| LAT adopts four grade progressive rates: | ||
| *For that part of the appreciation amount not exceeding 50% of the sum of deductible items, the tax rate shall be 30%. | ||
| For that part of the appreciation exceeding 50% but not exceeding 100% of the sum of deductible items, the tax rate shall be 40%. | ||
| *For that part of the appreciation exceeding 100% but not exceeding 200% of the sum of deductible items, the tax rate shall be 50%. | ||
| *For that part of the appreciation amount exceeding 200% of the sum of deductible items, the tax rate shall be 60%. | ||
| 4.Stamp Tax: the tax rate is 0.05% of the buying price. | ||
| Foreign Companies | ||
| The taxes paid by foreign companies, which sales out a house property in China include: Business Tax, Stamp Tax, Land Appreciation Tax and Urban Real Estate Tax. | ||
| 1.Business Tax: The turnover of the taxpayers is composed of the total consideration and all other charges received from the buyers for the sales of the house properties by the taxpayers. The applicable tax rate is 5%. Usually, the all other charges received from the buyers include commissions, fund, pool fund, payment received on behalf, payment made on behalf and others charges related to this transaction. | ||
| 2.Stamp Tax: The seller of a house property when transferring the property shall pay the Stamp Tax. The tax rate is 0.05% and the tax base is the amount of payment indicated in taxable documents. | ||
| 3.Land Appreciation Tax: The appreciation equals to the balance of proceeds received by the seller of the property on the transfer of the real estate after deducting the sum of deductible items as prescribed. The prescribed deductible items include: | ||
| (1).Costs for the transfer of real estate: For the transfer of new house property not exceeding one year, the base of deductible items shall be the original price of the property. For the transfer of real estate exceeding one year, the base of deductible items shall be the replacement cost price times the depreciation ratio based on the remaining useful life. | ||
| (2).The taxes related to the transfer of real estate, including Business Tax, City Maintenance and Construction Tax, Educational Surcharge, Stamp Tax, appraised price and exchange commissions. | ||
| LAT adopts four grade progressive rates: | ||
| *For that part of the appreciation amount not exceeding 50% of the sum of deductible items, the tax rate shall be 30%. | ||
| *For that part of the appreciation amount exceeding 50% but not exceeding 100% of the sum of deductible items, the tax rate shall be 40%. | ||
| *For that part of the appreciation amount exceeding 100% but not exceeding 200% of the sum of deductible items, the tax rate shall be 50%. | ||
| *For that part of the appreciation amount exceeding 200% of the sum of deductible items, the tax rate shall be 60%. | ||
| 4.Urban Real Estate Tax: Amount of tax payable = Original value of the propertyх70%х1.2%. | ||
| TAX IMPLICATIONS ON FOREIGNERS BUYING A PROPERTY | ||
| The local taxes paid by individual foreign operators, foreign companies, which buy a house property in China, include: Stamp Tax, Real Estate Tax and Deed Tax. | ||
| 1.Stamp Tax: The buyer of a house property when buying the property shall pay the Stamp Tax. The tax rate is 0.05% and the tax base is the amount of payment indicated in taxable documents. | ||
| 2.Real Estate Tax: Amount of taxable tax = original value of the property х 70%х 1.2%. The individual foreign operators and foreign companies are not subject to Real Estate Tax but to Urban Real Estate Tax. The tax rate is 1.2% and the annual tax payable = Original value of the property х 1.2% х (1-30%). | ||
| 3.Deed Tax: DT is also a tax paid when buying a house property, the tax base is the transaction price and the tax rate ranging between 3% ~ 5 %. The specific applicable rates shall be determined by the Bureau of Finance of Beijing. | ||