Introduction: For a long time, there have been many disputes in the liquidation process due to the complexity of the project, the long period and the many links of real estate projects, and the complexity of the calculation and apportionment of land appreciation tax. Due to the relatively early promulgation of the current Provisional Regulations on Land Appreciation Tax and its implementation rules, the practice of collection and administration relies on the supplementation and adjustment of the normative documents of the State Administration of Taxation and various localities, so there are also some practical operations with inconsistent standards and calibers in various places.
Limited by space, this article only analyzes the individual issues of a real estate enterprise case in Hubei Province, and refers to the notices of provincial and municipal taxation bureaus on the administrative measures for LAT liquidation.
Brief description of "Land Appreciation Tax"
Land appreciation tax is a tax levied on units and individuals who transfer the right to use state-owned land and the property rights of above-ground buildings and other attachments for compensation to obtain value-added income.
There are two types of LAT tax payment in mainland China:
(1) For one-time real estate transactions, the conventional tax payment method of declaration and payment is implemented.
(2) In view of the frequent transactions of real estate enterprises, to adapt to their characteristics of long development cycle and frequent transactions, the model of "pre-collection and liquidation" is adopted. The real estate enterprise shall take the lead in paying the tax in advance in accordance with the pre-levy stipulated by various localities, and then carry out the liquidation after meeting the liquidation conditions, and refund the excess and make up for the deficiency.
Background of the case
A real estate development enterprise in Wuhan will develop its residential real estate sales, the project is developed in five phases, the liquidation of the plot is one of the phases, the sales revenue of 620 million yuan, residential income of 600 million yuan, including 125 sets of demolition and resettlement houses, commercial and parking space income of 20 million yuan, the enterprise has paid 97 million yuan of land cost for the development of the project, the development cost of 40000000 yuan, of which 100000000 yuan of demolition compensation, according to the ordinary residential, other (commercial and parking spaces) "dichotomy" liquidation.
According to the above situation, the following points need to be paid attention to in the liquidation process:
1. How to deal with 125 sets of demolition and resettlement houses in this LAT liquidation?
2. How to allocate the cost of the fifth phase of the project, and how to divide the cost between different business formats?
3. If the effective voucher of the development cost is missing and imperfect, can the cost be deducted?
Case Study
Disposal of 125 demolition and resettlement houses
According to the average selling price of the residential buildings of the liquidation project, it shall be regarded as sales revenue, and this amount shall be recognized as the demolition compensation fee of the real estate development project. In practice, in some cases, the resettlement house is not in the name of the real estate company, the property owner does not belong to the real estate company, and the construction application procedures are handled in the urban reform, but the construction subject is signed by the construction party and the real estate company.
Policy basis: According to the provisions of Article 6 of Guo Shui Han [2010] No. 220, if a real estate enterprise uses the real estate built by the project to resettle the relocated households, the resettlement house shall be treated as a sale, and shall be treated as a sale in accordance with the provisions of Article 3 (1) of (Guo Shui Fa [2006] No. 187) (i.e., determined according to the average price of the same type of real estate sold by the enterprise in the same area and in the same year; or by the competent tax authorities with reference to the local current year, The market price or appraised value of the same type of real estate is determined) and this is recognized as a demolition compensation for a real estate development project. The difference paid by the real estate development enterprise to the relocated households shall be included in the compensation for demolition and relocation, and the difference paid by the relocated households to the real estate development enterprises shall be deducted from the compensation for the demolition and relocation of the project.
How will the cost of the Phase 5 project be apportioned?
The cost allocation methods include the floor area method, the construction area method, the direct cost method, the floor height coefficient method, and the budget cost method.
In this liquidation, the land cost and demolition and resettlement fee are calculated and apportioned according to the proportion of the land area of the five projects, and the remaining costs can be clearly distinguished and applied to specific projects, and the direct cost method shall be included in the cost of the plot, and the costs that cannot be clearly distinguished shall be calculated and apportioned according to the proportion of the total construction area between the projects according to the development and benefit.
After the first apportionment, the cost of the liquidation project is divided into different types of business (ordinary residential, commercial, and parking spaces) according to the proportion of saleable floor area.
Policy basis: According to Article 25 (5) of the Eshui Cai Xing Memo [2021] No. 9, if the costs and expenses incurred in real estate development projects can be directly collected to specific beneficiary objects, they will be directly included in the deduction of the corresponding real estate type. If a taxpayer develops a project in phases or develops multiple projects at the same time, or constructs different types of real estate in the same project, the common costs and expenses incurred that cannot be directly attributed to the specific beneficiary shall be calculated and apportioned according to the proportion of the saleable floor area of the beneficiary or other reasonable methods determined by the tax department.
Tax compliance issues
3. In the process of liquidation, the tax authorities pay attention not only to the integrity of invoice compliance, but also to the large amount of cost contracts, final account documents, and the flow of funds to the entire evidence chain.
Policy basis: According to Article 4 (1) of Guo Shui Fa [2006] No. 187, the calculation of the amount of deduction items related to the liquidation items when a real estate development enterprise goes through the LAT liquidation shall be implemented in accordance with Article 6 of the Provisional Regulations on LAT and Article 7 of its Implementation Rules. Unless otherwise specified, the deduction of the amount paid for the acquisition of land use rights, real estate development costs, expenses and taxes related to the transfer of real estate shall be deducted by providing legal and valid certificates, and shall not be deducted if legal and valid certificates cannot be provided.
Therefore, it is recommended that enterprises pay attention to retaining all the information required for the liquidation of the tax bureau during the period from the beginning to the end of the project, so as to avoid the cost that has been incurred due to the lack of information that cannot be deducted, so as to help enterprises reduce their tax burden.
Enterprises should keep abreast of the latest policies, conduct business under the premise of compliance, and plan in advance for the disputed points involved in the project, and do a good job in the management and control of the whole process of business, so as to achieve the integrated development of industry and finance.
If your business needs professional tax planning and guidance on tax-related disputes, it is recommended to entrust financial and tax law experts to handle it in a timely manner.