The Ministry of Finance answers reporters' questions: The lower limit of the pre-collection rate for land value-added tax in various regions will be uniformly reduced by 0.5 percentage points

In order to implement the decisions and deployments of the Central Committee of the Communist Party of China and the State Council, and to promote the stable and healthy development of the real estate market, the Ministry of Finance, the State Taxation Administration, and the Ministry of Housing and Urban-Rural Development recently issued the "Announcement on Tax Policies to Promote the Stable and Healthy Development of the Real Estate Market." The State Taxation Administration also released the "Announcement on Reducing the Lower Limit of the Pre-collection Rate for Land Value-Added Tax," which will take effect on December 1, 2024. Relevant officials from the Department of Taxation of the Ministry of Finance, the Property and Behavior Tax Department and the Goods and Services Tax Department of the State Taxation Administration, and the Real Estate Market Supervision Department of the Ministry of Housing and Urban-Rural Development answered reporters' questions.

1. What is the main background for this adjustment of tax policies related to the real estate market?

Answer: The Central Committee of the Communist Party of China attaches great importance to the stable and healthy development of the real estate market. The Third Plenary Session of the 20th Central Committee proposed allowing relevant cities to cancel the standards for ordinary and non-ordinary residential properties and to improve the real estate tax system. The Central Political Bureau meeting emphasized the need to promote the stabilization of the real estate market, to promptly improve policies related to land, finance, and taxation, and to promote the construction of a new model for real estate development.

To implement the decisions and deployments of the Central Committee, it is necessary to clarify how to connect the preferential policies for value-added tax and land value-added tax related to the cancellation of the standards for ordinary and non-ordinary residential properties, and to further adjust and optimize relevant tax policies in conjunction with the current operation of the real estate market, increasing support to promote the stable and healthy development of the real estate market.

2. What adjustments have been made to the tax policies related to the real estate market?

Answer: (1) Increase the preferential policies for deed tax in housing transactions to actively support residents' rigid and improved housing needs; reduce the lower limit of the pre-collection rate for land value-added tax to alleviate the financial difficulties of real estate companies.

Regarding deed tax, the current area standard for enjoying the low tax rate of 1% will be raised from 90 square meters to 140 square meters, and it is clarified that the four cities of Beijing, Shanghai, Guangzhou, and Shenzhen can uniformly apply the deed tax preferential policies for the second set of housing for families, meaning that after the adjustment, nationwide, for individuals purchasing their only housing and the second set of housing for families, as long as the area does not exceed 140 square meters, the deed tax will be uniformly paid at a rate of 1%.

Regarding land value-added tax, the lower limit of the pre-collection rate for land value-added tax in various regions will be uniformly reduced by 0.5 percentage points. Localities can adjust the actual pre-collection rate based on local conditions.

(2) Clarify the preferential policies for value-added tax and land value-added tax that are connected with the cancellation of the standards for ordinary and non-ordinary residential properties, reduce the transaction costs for second-hand housing, and maintain the tax burden stability for real estate companies.

Regarding value-added tax, after the cancellation of the standards for ordinary and non-ordinary residential properties in relevant cities, individuals selling housing purchased for more than 2 years (including 2 years) will be exempt from value-added tax. The original regulation that imposed value-added tax on individuals selling non-ordinary housing purchased for more than 2 years (including 2 years) in the four cities of Beijing, Shanghai, Guangzhou, and Shenzhen will be stopped accordingly.

Regarding land value-added tax, in cities that have canceled the standards for ordinary and non-ordinary residential properties, taxpayers who construct and sell ordinary standard residential properties with a value-added amount not exceeding 20% of the deductible project amount will continue to enjoy the exemption from land value-added tax 3. What are the main contents of the adjusted deed tax preferential policy for housing transactions? How can taxpayers apply for the preferential policy?

Answer: (1) Policy content. For individuals purchasing their only family housing (the family members include the buyer, spouse, and minor children, the same below), with an area of 140 square meters or less, the deed tax is levied at a reduced rate of 1%; for areas exceeding 140 square meters, the deed tax is levied at a reduced rate of 1.5%.

For individuals purchasing a second family housing, with an area of 140 square meters or less, the deed tax is levied at a reduced rate of 1%; for areas exceeding 140 square meters, the deed tax is levied at a reduced rate of 2%. The second family housing refers to the second housing purchased by a family that already owns one housing.

(2) Application method. Taxpayers applying for tax benefits should submit proof of family member information to the competent tax authority and a written inquiry result regarding the family's housing situation issued by the real estate management department at the location of the purchase. If the conditions for information sharing are met, taxpayers may authorize the competent tax authority to obtain relevant information through information sharing; if information sharing conditions are not met and taxpayers cannot submit relevant proof materials, they may apply for the notification commitment system as prescribed, submit the corresponding "Tax Certification Notification Commitment Letter," and bear legal responsibility for the authenticity of the commitment.

Specific operational measures will be formulated by the finance, tax, and real estate management departments of each province, autonomous region, and municipality directly under the central government.

To allow more taxpayers to enjoy the policy benefits, for individuals purchasing housing and declaring to pay deed tax after December 1, 2024, as well as those who purchased housing before December 1, 2024, but declare to pay deed tax after December 1, 2024, all of which meet the provisions of the newly released announcement can be executed according to the newly released announcement.

4. What are the main contents of the value-added tax preferential policy related to the cancellation of ordinary and non-ordinary residential standards?

Answer: In Beijing, Shanghai, Guangzhou, and Shenzhen, where the standards for ordinary and non-ordinary residential properties have been canceled, the unified personal sales housing value-added tax policy applicable to other regions in the country will apply. For individuals in these cities selling housing purchased for more than 2 years (including 2 years), they will be exempt from value-added tax.

The relevant content of Article 5, Paragraph 1, and the corresponding cessation of implementation of Paragraph 2 of Attachment 3 of the "Notice of the Ministry of Finance and the State Administration of Taxation on the Comprehensive Launch of the Pilot Program for the Change of Business Tax to Value-Added Tax" (Cai Shui [2016] No. 36).

Before December 1, 2024, for personal sales of housing where the value-added tax has not been declared and paid, those that meet the provisions of the newly released announcement can be executed according to the newly released announcement.

5. What are the main contents of the land value-added tax preferential policy related to the cancellation of ordinary and non-ordinary residential standards?

Answer: In cities where the standards for ordinary and non-ordinary residential properties have been canceled, according to Article 8, Item 1 of the "Interim Regulations on Land Value-Added Tax of the People's Republic of China," taxpayers constructing and selling ordinary standard residential properties, where the increased value does not exceed 20% of the deducted project amount, will continue to be exempt from land value-added tax According to Article 11 of the "Interim Regulations on the Implementation of the Land Value Increment Tax of the People's Republic of China," the specific implementation standards for relevant cities are determined by the people's governments of each province, autonomous region, and municipality directly under the central government. After the specific implementation standards are published, tax authorities will apply the newly published standards to projects that are newly accepted for settlement declaration, as well as to projects that were accepted for settlement declaration before the publication of the specific implementation standards but have not yet issued a settlement review conclusion. Projects that received a settlement review conclusion before the publication of the specific implementation standards will continue to follow the original standards.

6. What are the main contents of lowering the lower limit of the land value increment tax pre-collection rate?

Answer: In line with China's real estate development model, the land value increment tax implements a pre-collection system. To fully leverage the regulatory role of the land value increment tax pre-collection, the State Administration of Taxation issued a document in 2010 clarifying the lower limits of pre-collection rates for various regions, which are: 2% for the eastern region, 1.5% for the central and northeastern regions, and 1% for the western region.

This adjustment uniformly lowers the lower limit of the land value increment tax pre-collection rate for all regions by 0.5 percentage points. After the adjustment, the eastern region will be 1.5%, the central and northeastern regions will be 1%, and the western region will be 0.5%.

7. What measures will tax authorities take to facilitate taxpayers in enjoying relevant preferential policies?

Answer: To ensure that taxpayers can timely enjoy the benefits of tax preferential policies, tax departments will work with relevant departments to implement a series of measures to continuously optimize tax services and enhance taxpayer satisfaction and sense of gain.

First, further enhance the efficiency of window services. After the announcement is published, local tax departments will rely on the "one-window acceptance" work model for real estate registration tax handling, further optimizing offline window settings and online operating processes, providing "one-stop" services for taxpayers to pay taxes and handle certificates in one go. In addition, tax departments will consider demand and may add service windows or extend tax handling hours to provide tax services for those in need.

Second, further optimize the way of providing materials. Continuously increase the efforts of departmental collaboration and information sharing, utilizing shared information for data pre-filling to reduce the burden of material provision and reporting for taxpayers. For those who do not meet the conditions for information sharing and cannot submit relevant supporting materials, taxpayers can choose to handle it according to the current regulations using the applicable notification commitment system.

Third, further strengthen policy publicity and interpretation. Local tax departments will work with relevant departments to provide professional policy content interpretation and tax handling process consultation services through dedicated tax guidance positions in tax service halls and the 12366 tax payment hotline, quickly responding to taxpayer concerns and ensuring orderly tax handling. At the same time, various media will be utilized to carry out policy publicity and interpretation, creating a favorable tax business environment