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TAX & FINANCE: Highlight of Land value added tax policy Consultation draft for public comment
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Highlight of Land value added tax policy
Consultation draft for public comment
土地增值税修订征求意见出台,
要点逐一看

By Kelvin Lee, PwC

BT 201910 TAX 02The current Provisional Regulations of the People’s Republic of China on Land Value-Added Tax (LVAT) (hereinafter referred to as the “Provisional Regulations”) has played a positive role in regulating the real estate market since its implementation on 1st of January, 1994, and has become one of the important sources of local tax revenue with the economic development and growth of the real estate market in China.
 

On 16th of July, 2019, the Ministry of Finance and the State Taxation Administration jointly issued the LVAT Law of the People's Republic of China (Consultation Draft) (hereinafter referred to as the “Consultation Draft”) and related interpretation (hereinafter referred to as the "Interpretation"). The Interpretation explains the necessity, feasibility and overall considerations for formulation of the LVAT Law, as well as its main content. The Consultation Draft was issued on 16th of July, 2019, for public comments until 15th of August, 2019.
 

In this issue of China Tax and Business Advisory, we will analyse the major modifications to the Provisional Regulations according to the Consultation Draft, and share our observations.
 

现行的《中华人民共和国土地增值税暂行条例》(以下简称“《暂行条例》”)自1994年1月1日起实施以来,对调控房地产市场发挥了积极作用,并且随着中国经济发展以及房地产市场的成长而成为了地方税收的重要来源之一。
 

财政部、国家税务总局于2019年7月16日联合向社会发布了《中华人民共和国土地增值税法(征求意见稿)》(以下简称《征求意见稿》)和相关说明(以下简称《说明》)。《说明》中对制定土地增值税法的必要性和可行性、制定该法的总体考虑和主要内容进行了解释说明。《征求意见稿》于2019年7月16日向社会公布并征求意见,截至时间为2019年8月15日。
 

在本期《中国税务/商务新知》中,我们将结合《征求意见稿》对《暂行条例》的重大修订进行分析,并分享我们的观察。

BT 201910 TAX 04In detail

I. Taxpayers and scope of taxation

According to Provisional Regulations, taxpayers refer to all units and individuals receiving income from the transfer of state-owned land use rights, buildings and their attached facilities. While in the Consultation Draft, the definition of taxpayers is modified to all units and individuals receiving income from the assignment of real estate property within the territory of the People's Republic of China. On one hand, the scope of taxation has been extended to the transfer of collective land use rights, buildings and their attached facilities, or to the use of collective land use rights, buildings and their attached facilities as a consideration for investment and shares; on the other hand, the expression on the taxable activity has changed from “transfer” to “assignment”. With more and more new real estate products and transaction methods, the scope of activities to be included in “assignment” remains to be clarified.
 

一、纳税人及征税范围

《暂行条例》规定的纳税人是转让国有土地使用权、地上的建筑物及其附着物并取得收入的单位和个人。《征求意见稿》将纳税人修改为在中华人民共和国境内转移房地产并取得收入的单位和个人。一方面将征税范围扩大到了出让集体土地使用权、地上的建筑物及其附着物,或以集体土地使用权、地上的建筑物及其附着物作价出资、入股;另一方面,对应税财产行为的表述也以“转移”代替了“转让”。在房地产产品和交易模式日益更新的情况下,“转移”的具体范围包括哪些行为有待明确。
 

II. Income and deduction

The Consultation Draft has deleted the phrase “income in the form of physical goods” from the scope of taxable income in Provisional Regulations. The scope of income in the Consultation Draft has been simplified to monetary income and non-monetary income.
 

The specific deductible items on calculating the added value basically remain unchanged. The Provisional Regulations stipulated that other deductible items are to be determined by the Ministry of Finance and the Consultation Draft has been changed to “determination by the State Council”. The reason behind such modification is that after the Provisional Regulations is escalated to a Law, the legal level and legislative body of the supporting implementation regulations are upgraded accordingly. Similar modification can also be found in Article 7 of the Consultation Draft, which states that "the specific scope and standards of the income and deductible items stipulated in this Law are to be determined by the State Council”.
 

二、收入和扣除

《征求意见稿》在收入范围中删除了“实物收入”的字样,即将收入分为货币收入与其他收入(即非货币收入),在文字表述上进行了精炼。
 

关于计算增值额时准予扣除项目的规定基本不变。《暂行条例》原规定“其他扣除项目由财政部规定”,而《征求意见稿》修改为由国务院规定。该项修改是与《暂行条例》上升为法律后,配套的实施条例的法律位阶和立法主体也相应上升。此项修改也与《征求意见稿》第七条“本法规定的收入、扣除项目的具体范围、具体标准由国务院确定”相互呼应。

BT 201910 TAX 05III. LVAT rates

The Consultation Draft still adopts the same four-level progressive tax rates at 30%-60%, which confirms the view of the Ministry of Finance and the State Taxation Administration that the current LVAT is complete and with a relatively sound collection and administration system, and therefore it is better to maintain the current taxation framework and the overall tax burden level.
 

三、税率

对于公众比较关注的税率,《征求意见稿》仍旧沿用了30%-60%的四级超率累进税率,从侧面印证了财政部和税务总局认为现行土地增值税要素完整、征管制度比较健全,宜保持现行税制框架和税负水平总体不变的观点。
 

IV. Deeming provision

Article 9 of the Consultation Draft stipulates the circumstances where the transaction price and deduction amount can be deemed in accordance with the Law. It revises the wording under the Provisional Regulations of “Where the transaction price of the transferred real estate property is lower than the appraisal price of such property without proper justification” to “where the price of the transferred real estate property is obviously low and without proper justification.” Thus, the reasonableness of the price can be measured from the purpose or substance of the taxable activity, rather than mechanically comparing it with the appraisal price. We hope that after the formal issuance of the LVAT Law, the local in-charge tax authorities can consider more about the objective factors that created the difference, such as the negotiating position and trading experience of the transferor and transferee, and other commercial considerations when considering whether to adopt the deeming provision.
 

It is still unclear how the “deeming provision” as stipulated in Article 9 of the Consultation Draft will be implemented or whether it will be based or by reference to the property appraisal price. Besides, taxpayers have concerns about whether such amendment will expand the discretionary power of the tax authorities. These are expected to be clarified in the subsequent implementation regulations of the LVAT Law.
 

In addition, under the circumstance where the amount of deductible items cannot be determined in relation to a taxable activity involving collective real estate property, Article 10 of the Consultation Draft stipulates that LVAT can be levied based on a certain percentage of the income generated from the assignment of that real estate property. The specific tax measures shall be proposed by the provincial people's government and reported to the Standing Committee at the same level for decision. This special provision is based on the fact that there are regional differences in the activeness of the transfer of collective land ownership and the registration rate of collectively owned property right confirmation in different parts of China.
 

四、核定征收

《征求意见稿》第九条规定了依法核定成交价格、扣除金额的情形。将《暂行条例》规定的“转让房地产的成交价格低于房地产评估价格,又无正当理由”修改为“转让房地产的价格明显偏低,又无正当理由。”这更多地从财产行为的目的或实质方面去衡量价格的合理性,而非机械地与评估价格进行比较。我们希望在土地增值税法正式颁布后,基层税务机关在考量是否采用核定征收时,也能够更多地考虑转让方和受让方之间在谈判地位、交易经验等方面存在差异的客观因素及其他商业考量。
 

《征求意见稿》第九条规定的“依法核定”如何执行以及是否会依据或者参考房地产评估价格尚未明确,纳税人对于该项修改是否会扩大税务机关的自由裁量权存在一定顾虑,期望在后续土地增值税法实施条例中能得以明确。
 

此外,《征求意见稿》第十条针对涉及集体房地产的应税财产行为无法确定扣除项目金额的情况,规定了可按照转移房地产收入的一定比例征收土地增值税,具体办法由省级人民政府提出,报同级人大常委会决定。这一特殊规定,是基于全国各地在集体土地所有权流转活跃程度、集体所有房地产确权登记率等方面存在地区差异这一实际情况。

BT 201910 TAX 06V. Tax preference

The current Provisional Regulations and policy documents stipulate that the ordinary standard housing and affordable housing with added value not exceeding 20% of the deductible amount can be exempted from LVAT. In the Consultation Draft, the two existing statutory tax exemptions are modified into discretionary tax reduction or statutory tax exemption under national laws and local administrative regulations. On one hand, the tax preferential treatment changes from rigid to flexible, and in combination with the provisions on the proportion of affordable housing and ordinary housing in the land transfer conditions, government has more ways to control and regulate the supply of state-owned land. On the other hand, the original tax exemption may be narrowed or even become uncertain, which causes great concern in the real estate industry.
 

Article 11 (3) of the Consultation Draft stipulates that "the State Council can stipulate other circumstances for the reduction or exemption of LVAT based on the national economic and social development needs, and report them to the Standing Committee of the National People's Congress for the record.” Taking into account the rapid changes in China's social and economic development, this provision provides flexibility to the State Council to provide new tax reductions and exemptions treatments in the future.
 

五、税收优惠

现行的《暂行条例》和政策文件规定纳税人建造普通标准住宅和保障性住房,增值额未超过扣除项目金额20%的免征土地增值税。《征求意见稿》将现有的这两个免税情形修改为国家法律和地方行政规章两个层级的减税或免税情形,而且由法定变成酌定。一方面,税收的刚性优惠变成弹性优惠,结合土地出让条件中对保障性住房和普通住宅比例的规定,丰富了政府在国有土地供应方面的调控手段。另一方面,原本确定的免税可能存在优惠缩窄甚至存在不确定性,这引起了房地产业界的较大关注。
 

《征求意见稿》第十一条第(三)款规定“国务院可以根据国民经济和社会发展的需要规定其他减征或免征土地增值税情形,并报全国人民代表大会常务委员会备案”。考虑到中国社会经济发展的快速变化以及保持税收法律的刚性和严肃性,该款规定为今后国务院规定新的减免税优惠预留了“接口”。

BT 201910 TAX 07VI. The timing of LVAT liability

Article 13 of the Consultation Draft stipulates that the time at which a liability to LVAT arises shall be the date of the signing of the real estate property assignment contract. There are two issues with this provision. Firstly, Article 1 of the Consultation Draft changes the taxable activity from "transfer" to "assignment", but generally, the date of signing the real estate property contract should precede the actual registration or assigned date of the real estate property. Secondly, as normally the buyer would not have paid the full amount of the purchase price on signing the contract, therefore the taxpayer's ability to bear the tax should also be considered. It may be more reasonable to take the date and amount of payment as agreed in the contract or the date of actual receipt of the payment as the time at which the LVAT liability arises, and this is more consistent with the timing of taxable income recognition under CIT and VAT.
 

六、纳税义务发生时间

《征求意见稿》第十三条规定土地增值税纳税义务发生时间为房地产转移合同签订的当日。这一规定存在两方面的问题。第一、《征求意见稿》第一条将应税财产行为由“转让”修改为“转移”,但一般来说房地产合同签订时还未转移财产,也尚未进行房地产转让登记。第二、通常来说,合同签订时一般买方还未交付全部房款,应考虑纳税人的负担能力。按照合同约定的付款日期和金额或者实际收取款项的日期作为纳税义务发生时间可能更为合理,也与企业所得税和增值税收入确认时间更趋同。
 

VII. Tax collection and administration

Article 15 of the Consultation Draft referred to the LVAT clearance conditions stipulated in Guoshuifa [2006] No. 187, in which two circumstances that were treated as "can be settled"1 under that circular are now treated as "shall be settled" under the Consultation Draft. Moving the LVAT clearance forward may cause cash flow pressure to some property development companies.
 

In addition, under the current practice the tax authorities will perform the tax clearance review based on the information provided by the taxpayers, Article 15 of the Consultation Draft change this practice and requires taxpayers who are engaged in the real estate property development to complete the tax clearance by themselves. When the tax authorities conduct follow-up inspection on the LVAT items, and the tax payable determined by the inspection is greater than the taxpayer’s clearance amount under self-declaration, the underpayment may be subject to late payment surcharge.
 

The newly added Article 17 on requiring the tax authorities and relevant departments to establish a LVAT-related information sharing mechanism and coordination mechanism together with Article 21 on the legal liabilities of taxpayers, tax authorities and tax officers on violating the LVAT Law reflects the decision of the Ministry of Finance and the State Taxation Administration to change the current situation of “focusing on provisional LVAT collection and neglecting the LVAT clearance”.
 

七、税款征收管理

《征求意见稿》第十五条参照了国税发[2006]187号规定的土地增值税清算条件,并将其中两个“可以清算”1的情形作为“应当清算”的情形,提前对项目进行土地增值税清算可能对部分房地产开发企业带来现金流的压力。
 

此外,《征求意见稿》第十五条将现行税务机关根据纳税人提供的资料进行清算审核的做法,调整为从事房地产开发的纳税人应自行完成清算。税务机关对土地增值税项目进行后续检查时,若检查结论认定的应交税金大于纳税人自行清算金额,除需补交税金外,存在需要加收滞纳金的风险。
 

结合新增的第十七条所规定的税务机关与相关部门建立土地增值税涉税信息共享机制和工作配合机制、第二十一条所规定的纳税人、税务机关及其工作人员的违法责任,体现了财政部和税务总局决定改变目前“重预征、轻清算”的现状。

BT 201910 TAX 01The takeaway

The Consultation Draft is a significant step towards implementing the statutory principle of taxation and also an important move in improving the local tax system. By upgrading the Provisional Regulations to law, it can better improve the LVAT system, enhance the authority of legislation and the rigidity of law enforcement, further increase the local fiscal revenue, regulate the income distribution of land added value and promote the healthy and stable development of the real estate market, which would enhance China's real estate property tax system and advance the modernisation of the national governance system and capacity.
 

Since the goal of “fully implementing the statutory principle of taxation by 2020” has been set at the Third Session of the 12th National People's Congress, it may not be realistic to revise the major content of LVAT Law at the time of simply moving out of the Provisional Regulations framework. However, considering that China's social and economic environment is now far more different than that in 1993 when the Provisional Regulations was first issued, the profit margin of the real estate industry has gradually shrunk, and new types of property products have been introduced, the new LVAT Law should follow the current situation and complement the country's ongoing land system reform.
 

In addition to answering the questions of how to legislate LVAT Law at the legal level to better utilize the function of LVAT in regulating the real estate market and protect local fiscal revenue, the subsequent formulation of implementation regulations and the amendment of the LVAT clearance procedures will have a more direct impact to taxpayers on the LVAT tax burden, compliance costs, etc. In particular, whether Article 7 of the Consultation Draft and the corresponding supporting regulations can eliminate differences in cost deduction items, deduction standards and apportioning methods, as well as different provisions applied in the LVAT settlement which currently exist across the country. In addition to LVAT, the legislation of property tax is also forging ahead steadily. We will continue to actively participate in the formulation of laws and related rules and regulations by offering advices to the legislative and executive authorities. We will also continue to pay attention to further development in this regard and timely share our observations with you.
 

《征求意见稿》是落实税收法定原则的重要步骤,也是健全地方税体系改革的重要内容。将《暂行条例》上升为法律,有利于完善土地增值税制度,增强立法权威性和执法刚性,发挥土地增值税筹集财政收入、调节土地增值收益分配、促进房地产市场健康稳定发展的作用,有利于健全中国的房地产税收体系、推进国家治理体系和治理能力现代化。
 

由于十二届全国人大三次会议确定了在2020年之前全面落实税收法定原则这一目标,脱离《暂行条例》的框架对土地增值税法本身进行重大修订似乎并不现实。但是考虑到如今中国的社会经济环境相比1993年《暂行条例》出台时已有很大不同,房地产行业的利润空间逐渐收窄,新型的房地产产品推陈出新,新的土地增值税法律亦应当与时俱进,并配合国家正在进行的土地制度改革。
 

除了在法律层面如何立法,更好地发挥土地增值税在调控房地产市场以及保障地方财政收入方面的作用之外,后续的实施条例制定以及土地增值税清算规程的修订,将对纳税人的土地增值税税收负担、合规成本等产生更加直接的影响。特别是《征求意见稿》第七条以及相应的配套法规能否消除目前全国各地对于成本扣除项目、扣除标准、分摊方法等方面的差异,以及在土地增值税清算过程中更多的不同规定。除了土地增值税以外,房地产税立法也在稳步推进中。我们将继续积极地通过向立法部门和行政部门提出建议,积极参与法律及相关法规、规章的制定过程。我们也将继续关注这方面的发展,并及时分享我们的观察。

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