China’s Ministry of Finance- is working hard to study the tax policies that will link up with the cancellation of standards for common and non-common residences.
During a press conference at the State Council Information Office on October 17, Assistant Minister of Finance Song Qichao revealed that the Ministry of Finance is currently working on clarifying tax policies related to the categories of ordinary and non-ordinary residential properties. This includes key areas such as value-added tax (VAT) and land value increment tax.
Under the current policies, if we look at VAT, individuals selling residential properties that they have owned for more than two years are exempt from VAT in cities outside of China’s four first-tier cities: Beijing, Shanghai, Guangzhou, and Shenzhen. In these four cities, ordinary residential properties are exempt from VAT if owned for more than two years, while non-ordinary residential properties are subject to the tax. Regarding land value increment tax, ordinary standard residential properties with a sales appreciation rate below 20% are also exempt from this tax.
Song highlighted that the Ministry is actively adjusting these tax policies for three main reasons: first, to coordinate the pace of real estate regulation with the local fiscal situation, ensuring a scientific and rational approach; second, to grant local authorities a degree of autonomy to maintain stability and fairness in policy implementation; and third, to effectively reduce the financial burden on both real estate companies and homebuyers, ultimately promoting a stabilization of the housing market. The specific policies are currently undergoing necessary procedures and will be announced to the public once approved.
On the topic of supporting local entities in using special bonds to acquire existing housing stock for affordable housing purposes, Song emphasized that this initiative is primarily driven by local decision-making and voluntary implementation. It will adhere to the principles of the rule of law and be based on market operations. Localities can utilize special bonds to purchase existing residential properties for affordable housing, provided that the project’s financial returns are balanced. Moving forward, the Ministry of Finance will work with relevant departments to finalize the details and requirements of this policy, aiming for a swift implementation.