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2021

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Lawyer Sheng Bang from the Legal System | Lin Zijun: Interpretation of the Deed Tax Law of the People's Republic of China

The Deed Tax Law of the People's Republic of China shall come into effect on September 1, 2021, and the Provisional Regulations on Deed Tax previously issued by the State Council shall be abolished simultaneously. The implementation of the Deed Tax Law means that deed tax, as a major tax category, has since been scattered in the Provisional Regulations on Deed Tax, various "implementation rules", relevant "letters" and "notices" from the Ministry of Finance and the State Administration of Taxation, and has risen to the legal level.


The Deed Tax Law of the People's Republic of China shall come into effect on September 1, 2021, and the Provisional Regulations on Deed Tax previously issued by the State Council shall be abolished simultaneously. The implementation of the Deed Tax Law means that deed tax, as a major tax category, has since been scattered in the Provisional Regulations on Deed Tax, various "implementation rules", relevant "letters" and "notices" from the Ministry of Finance and the State Administration of Taxation, and has risen to the legal level. The "Deed Tax Law" has supplemented the areas where the original provisions were vague or omitted. The implementation of this law is not only an important measure to improve China's tax law system, but also further promotes the process of China's tax legislation.

 

Next, we will provide a brief interpretation of the noteworthy content in the Deed Tax Law:

 

1、 Regarding tax rates

 

Tax rates have always been the primary topic of concern for people. The previous Provisional Regulations on Deed Tax stipulated that the deed tax rate was 3% -5%, which was maintained by the Deed Tax Law but not increased. Previously, some people loudly promoted the increase in deed tax rates, and even claimed that "buying a house early" was a pure misreading.

 

Some people may question: 'The deed tax for buying a house is not as high as usual.' This is because deed tax is a local tax, which is retained in the local area after collection. Previously, according to the Provisional Regulations on Deed Tax, provincial people's governments could determine the tax rate themselves during the implementation process. However, after the implementation of the Deed Tax Law, it is necessary for the provincial-level people's government to submit it to the Standing Committee of the People's Congress at the same level for decision, and to report it to the Standing Committee of the National People's Congress and the State Council for record keeping, which is also the legal meaning of taxation.

 

2、 Deed Tax on Personal Purchase of Housing

 

Based on personal interests, most people still ask the most practical question: "What is the deed tax for individual housing purchases now?" Regarding this point, although the Deed Tax Law does not explicitly specify it, the Announcement of the Ministry of Finance and the State Administration of Taxation on the Connection of Preferential Policies after the Implementation of the Deed Tax Law (Announcement No. 29 of 2021 of the Ministry of Finance and the State Administration of Taxation) has already provided an answer. The announcement specifies in Annex 1 that the Notice of the Ministry of Finance, the State Administration of Taxation, and the Ministry of Housing and Urban Rural Development on Adjusting the Preferential Policies for Deed Tax and Business Tax in Real Estate Transactions (Cai Shui [2016] No. 23) remains valid.

 

In short, the deed tax for individuals purchasing housing is as follows:

 

1. For individuals who purchase the only household housing (family members include the purchaser, spouse, and underage children, the same below) with an area of 90 square meters or less, deed tax will be levied at a reduced rate of 1%; For areas over 90 square meters, deed tax will be levied at a reduced rate of 1.5%.

 

2. For individuals who purchase a second family improvement housing with an area of 90 square meters or less, deed tax will be levied at a reduced rate of 1%; For areas over 90 square meters, deed tax will be levied at a reduced rate of 2%. The second set of improved housing for families refers to the second set of housing purchased by families who already own one set of housing.

 

3、 Regarding the scope of exemption

 

In daily life, some people may want to change their house to one party's name during marriage, or encounter the issue of deed tax when their elders pass away and their children inherit the property under their name. Previously, whether these situations could enjoy tax exemption policies was scattered in different documents, which was inconvenient to access. After the implementation of the Deed Tax Law, Article 6 clarified the exemption from deed tax.

 

For the above-mentioned situations that concern the general public, the law also provides for the change of land and housing ownership between the husband and wife during the existence of the marriage relationship in the fourth and fifth items of this article; The legal heir who inherits the ownership of land and houses through inheritance is exempt from deed tax.

 

4、 The scope of taxation has been expanded

 

The Land Management Law of the People's Republic of China, revised in August 2019, has detailed provisions for the transfer of collective construction land. In order to connect with this, the Deed Tax Law has revised the "transfer of state-owned land use rights" stipulated in the Provisional Regulations to "transfer of land use rights" in the provisions on the scope of taxation. This means that after the formal implementation of the Deed Tax Law, The transfer of collectively operated construction land also requires payment of deed tax in accordance with regulations.

 

5、 Simplify tax declaration

 

According to the original Provisional Regulations on Deed Tax, the declaration and payment of deed tax shall be made within 10 days after the occurrence of the tax obligation, and shall be made before (when) the ownership of the real estate is handled. The declaration and payment time of deed tax shall be separate; The Deed Tax Law combines the two into one, reducing the burden on taxpayers and improving the efficiency of tax collection and management.

 

Throughout the entire text of the Deed Tax Law, it is largely an upgrade and continuation of the Provisional Regulations on Deed Tax, and also another acceleration of the principle of statutory taxation. The implementation of the Deed Tax Law has better adapted to the development and changes of the economy and society, further strengthened the protection of taxpayers' rights and interests, and will also bring greater convenience to taxpayers in handling taxes.