Editor's note: In real estate projects, civil air defense parking spaces are a common type of projects, which have caused many disputes over land tax increases due to the special nature of civil air defense property rights. For example, whether civil air defense parking spaces should be subject to land tax increases, whether they fall within the scope of liquidation, whether the consideration obtained is included in income, whether construction costs can be deducted as deductions, and how to collect costs, etc. This article will discuss several key points among the many controversial points, and give suggestions on how to avoid the risk of land tax increase and liquidation of civil air defense parking spaces.
1. Case introduction: The liquidation of the civil air defense parking space has caused controversy
(1) Basic information of the project
The property types of the "Century Jiayuan" project developed by Real Estate Company A include above-ground residential, commercial and underground parking spaces, with a total construction area of 85,000 square meters. Among them, the above-ground residential construction area is 70,000 square meters, which meets the local ordinary standard residential standards, the commercial construction area is 5,000 square meters, and the underground parking space construction area is 10,000 square meters.
According to the land transfer contract of the project, the land transfer fee is 850 million yuan (15 floors above ground and 1 floor underground), but the contract does not clearly distinguish the land price corresponding to each property type.
(2) The focus of the dispute
In the liquidation of the land tax increase, the two parties have three disputes over how to liquidate the civil air defense parking spaces:
1. Is the civil air defense parking space available for sale?
2. Can the land cost corresponding to the civil air defense parking space be included in the amount of the deduction item?
3. Should civil air defense parking spaces participate in the collection of deduction items?
(3) The view of tax enterprises
Company A argued that: (1) since the government department did not handle the acceptance and handover of the civil air defense project, the civil air defense parking space involved in the case belonged to saleable real estate, and the 10,000 square meters of civil air defense parking space should be included in the saleable area of "other types of real estate"; (2) according to Guo Shui Fa [2006] No. 187, the cost of saleable real estate was allowed to be deducted, so the land cost corresponding to the civil air defense parking space should be included in the amount of the deduction item, that is, the total land cost of the project of 850 million yuan belonged to the amount of the deduction item and should not be reduced in any way; "Principle of income-cost proportion", because the civil air defense parking spaces have not obtained transfer income, they do not participate in the collection and apportionment of deduction items, and the land cost is apportioned according to the proportion of the respective construction area of ordinary standard residential and commercial buildings, and the conclusion of the declaration and liquidation is: the land cost of ordinary standard residential buildings is 793 million yuan (850 million yuan/75,000 square meters * 70,000 square meters), and the land cost of other types of real estate is 56.7 million yuan (850 million / 75,000 square meters * 5,000 square meters).
According to the liquidation report of Company A, the value-added rate of ordinary standard residential buildings is 12.5%, which meets the conditions for tax exemption and should be refunded 25.2 million yuan, and other types of real estate should be taxed by 16 million yuan, with a total tax refund of 9.2 million yuan.
According to the tax authorities: (1) the property rights of civil air defense parking spaces belong to the state and are non-saleable real estate, and 10,000 square meters of civil air defense parking spaces should be deducted from the saleable area;(2) according to Guo Shui Fa [2006] No. 187, because the civil air defense parking spaces have not been handed over to the government and have not been used for public utilities, the land cost corresponding to the civil air defense parking spaces should be deducted from the amount of the deduction items After deducting the land cost, the land cost that can be included in the deduction amount is: 850 million yuan - 850 million yuan * (10,000㎡ / 85,000㎡) = 750 million yuan; (3) The city adopts the "saleable floor area method" to share the cost, and the civil air defense parking space is an unsaleable real estate and does not participate in the cost collection and apportionment, and the liquidation audit conclusion: the land cost of ordinary standard residential buildings is 700 million yuan (750 million / 75,000㎡* 70,000 square meters), and other types of real estate share the land cost of 50 million yuan (750 million yuan/75,000 square meters*5,000 square meters).
According to the conclusion of the liquidation audit of the tax authorities, the value-added rate of ordinary standard residential buildings is 22.73%, which does not meet the conditions for tax exemption and should be taxed at 44.79 million yuan, and other types of real estate should be taxed at 19.04 million yuan, with a total tax of 63.84 million yuan.
In the following, we will use this case as a guide to discuss the handling of underground civil air defense parking spaces in the liquidation of land tax increases.
2. Should the civil air defense parking space be included in the land tax increase liquidation unit, and whether it is saleable real estate?
In the above-mentioned case, is it legal for the enterprise to include it in the scope of liquidation and include it in the saleable area? This issue should be analyzed in combination with the tax policy and the provisions on the property rights of civil air defense parking spaces.
(1) Civil air defense parking spaces should be included in the scope of land tax increase liquidation
According to Article 1 of the Notice of the State Administration of Taxation on Issues Concerning the Administration of LAT Liquidation of Real Estate Development Enterprises (GSF [2006] No. 187), "LAT shall be liquidated on the basis of real estate development projects approved by the relevant state departments, and for projects developed in phases, it shall be liquidated on the basis of phased projects". Therefore, the liquidation of land tax increase is managed according to the project, and the specific liquidation unit is subject to the registered project. Due to the different regulations on the liquidation of the project, some are subject to the project of the National Development and Reform Commission, and some are subject to the project planning permit, but in either case, the determination of the liquidation unit of the land tax increase does not depend on whether the developer has property rights, and the real estate within the scope of the registered project belongs to the scope of the liquidation unit, and the civil air defense parking space belongs to the inseparable part of the registered project and is an integral part of the liquidation unit.
(2) Civil air defense parking spaces are non-saleable real estate
According to Article 254 of the Civil Code, "national defense assets belong to the State", and according to Article 2 of the Civil Air Defense Law, "civil air defense is an integral part of national defense". It can be seen from this that civil air defense projects are an important part of the mainland's national defense construction and are owned by the state.
According to Article 5 of the "Civil Air Defense Law": "Civil air defense projects shall be used and managed by investors in peacetime, and the profits shall belong to the investors"; Article 22: "Newly built civil buildings in cities shall be built in accordance with relevant state regulations to build basements that can be used for air defense in wartime", and Article 48: "Where a new civil building in a city violates the relevant provisions of the State and does not build a basement that can be used for air defense in wartime, the competent department of civil air defense of the people's government at or above the county level shall give a warning to the person concerned and order the construction within a time limit, and may also impose a fine of not more than 100,000 yuan." ”。 Therefore, the construction of civil air defense projects by real estate enterprises in new projects is an act of fulfilling their statutory obligations, and they will be subject to administrative penalties if they do not do so. After the completion and acceptance of the civil air defense project, the ownership belongs to the state, and the developer enjoys the right to use it in non-war times, and enjoys the benefits in accordance with the principle of "whoever invests benefits".
In this case, since the legislation clearly states that the property rights of civil air defense parking spaces belong to the state, and the developer cannot handle the property rights, cannot sell them to the outside world, and only enjoys the right to use, no matter whether the civil air defense parking spaces are handed over to the government, they are all non-saleable real estate for the developer. There is no legal basis for taxpayers to include the area of civil air defense parking spaces in the saleable construction area, and the tax authorities deduct the civil air defense parking spaces from the saleable construction area in accordance with the law.
It should be noted that if after the completion of the civil air defense parking space, due to planning adjustments and other reasons, it is finally changed to other uses, and the developer can apply for the property right certificate, it can be adjusted to saleable real estate and included in the saleable construction area.
3. Are the benefits and costs of civil air defense parking spaces included in the scope of land tax increase liquidation?
The above has been analyzed, the civil air defense parking space belongs to the scope of liquidation, so whether the income and cost of the operation of the civil air defense parking space are included in the liquidation project?
(1) The operating income from the rental of civil air defense parking spaces does not belong to the taxable income of the land tax increase
According to Article 2 of the Provisional Regulations on Land Appreciation Tax, "Units and individuals who transfer the use right of state-owned land, buildings on the ground and their attachments (hereinafter referred to as the transfer of real estate) and obtain income are taxpayers of the Land Appreciation Tax (hereinafter referred to as taxpayers) and shall pay the Land Appreciation Tax in accordance with these Regulations". The leasing behavior in the above case is obviously not a real estate transfer, and the rental income obtained by the taxpayer is not subject to the taxation of land increase tax and is not included in the liquidation income of land increase.
What needs to be extended is that some developers have handed over civil air defense parking spaces to owners for convenience reasons by signing a permanent right to use transfer agreement, and the implementation of the situation varies from place to place. Most provinces use the registration of change of ownership as the standard for paid transfer, even if the consideration obtained by agreeing to transfer the permanent use right is not treated as transfer income, but there are also places that believe that the transfer of permanent use rights should be regarded as the transfer of real estate for compensation, such as: On January 23, 2021, the Inner Mongolia Taxation Bureau officially answered a question: "According to the Notice of the State Administration of Taxation on Issues Concerning the Administration of Land Appreciation Tax Liquidation of Real Estate Development Enterprises" (GSF [2006]) Paragraph 3 of Article 4 of No. 187) stipulates that the transfer of the permanent right to use underground parking spaces without property rights shall be included in the scope of LAT liquidation and the income shall be calculated". Developers need to pay careful attention to the tax risks of such businesses.
(2) The cost can be deducted only after the civil air defense parking space is handed over to the government after it is completed
According to the third paragraph of Article 4 of the Notice of the State Administration of Taxation on Issues Concerning the Administration of Land Appreciation Tax Liquidation of Real Estate Development Enterprises (Guo Shui Fa [2006] No. 187), it is stipulated that "the houses, clubs, parking lots (garages), property management sites, substations, heating stations, water plants, cultural and sports venues, schools, kindergartens, nurseries, hospitals, and residential committees and police stations developed and constructed by real estate development enterprises and supporting the liquidation projects shall be used in neighborhood committees and police stations, clubs, parking lots (garages), property management sites, substations, heating stations, water plants, cultural and sports venues, schools, kindergartens, nurseries, hospitals, Public facilities such as posts and telecommunications shall be handled according to the following principles: 1. The costs and expenses of public facilities such as postal and telecommunications shall be deducted if the property rights belong to all the owners after completion; 2. The costs and expenses of public facilities shall be deducted if they are transferred to the government or public utilities for non-profit social public undertakings free of charge after completion; 3. If they are transferred for compensation after completion, the income shall be calculated and the costs and expenses shall be allowed to be deducted". To sum up, since the civil air defense parking space belongs to the supporting parking lot (library) in the project planning, the above policy should be applied. If the civil air defense parking spaces are handed over to the government free of charge and used for non-profit social public undertakings, even if no income is obtained, the costs incurred can still be included in the total deduction amount. If it is not handed over to the government, no deduction of costs and expenses will be allowed at the time of liquidation. Whether it is handed over to the government free of charge, the main concern is the transfer of checklist documents.
In this case, the taxpayer did not hand over the civil air defense parking space to the government after it was built, nor did it use it for non-profit social public undertakings, and the tax authorities reduced the cost of the civil air defense parking space from the amount of the deduction item, which did not violate the provisions of the tax law. However, as for the cost reduction method of civil air defense parking spaces, we believe that it is inappropriate for the tax authorities to simply operate in accordance with the "construction area proportion coefficient method". The specific land cost borne by the civil air defense parking space shall be determined according to the land transfer contract and the relevant documents of land acquisition. If it is clearly stated in the land transfer contract that the civil air defense area does not bear the land transfer fee, or the underground part of the construction area is not included in the project floor area ratio, and the land transfer price is calculated according to the building area of the capacity part multiplied by the unit price, then the underground civil air defense actually does not bear the land cost; if the land price is calculated according to the total construction area, or the land price is calculated according to the unit price of each property type and the sum of the respective construction area, the underground civil air defense part shall apportion the land cost according to the construction area; if the land price is calculated according to the floor height coefficient, the underground civil air defense department shall confirm the land cost according to the proportion of the floor height。 Therefore, the tax authorities in this case should further investigate and verify the confirmation method of the land transfer fee, which cannot be determined simply based on the proportion of the construction area.
It should be noted that in this case, the taxpayer was unable to hand over the civil air defense project due to the fact that the relevant government departments did not strictly implement the acceptance specifications for the civil air defense project and refused to accept and hand over the civil air defense project. In this case, it is recommended that the taxpayer actively communicate with the tax department, and request the relevant government departments to take the lead in solving the problem of acceptance of civil air defense projects, strive to properly handle civil air defense projects, and deduct costs in the liquidation of land tax increases in accordance with the law.
4. How to participate in the collection of deduction items for civil air defense parking spaces?
According to Article 21 of the Notice of the State Administration of Taxation on Printing <土地增值税清算管理规程>and Distributing (Guo Shui Fa [2009] No. 91), "check whether the deduction items meet the following requirements:...... (5) If a taxpayer develops a project in phases or develops multiple projects at the same time, or builds different types of real estate in the same project, it shall adopt a reasonable distribution method according to the beneficiary object and share the common costs and expenses. To sum up, there is no requirement that one method must be chosen for land cost collection, but a reasonable method should be selected according to the principle of beneficiary object.
If the cost of civil air defense parking spaces has been included in the total amount of deduction items, it is still necessary to further explore whether civil air defense parking spaces participate and how to participate in the collection of deduction items. Some tax authorities believe that the costs incurred in civil air defense parking spaces can be directly collected into civil air defense parking spaces and are not subject to cost sharing. We believe that this view does not meet the requirements of the principle of benefit, and the civil air defense parking space benefits the entire saleable floor area of the project, and according to the principle of benefit, its cost should be apportioned to all the formats in the liquidation unit.
In this case, if the civil air defense parking space has been handed over to the government in accordance with the law, and the corresponding land cost is included in the amount of the deduction item, the land cost corresponding to the civil air defense parking space shall be allocated to the ordinary standard residential and other types of real estate of the project in accordance with the reasonable apportionment method such as the saleable floor area method, and shall be deducted in accordance with the law when the land tax increase is liquidated.
V. Conclusion
To sum up, the underground civil air defense involved in this case is an integral part of national defense construction and a supporting facility that must be built by real estate enterprises. In the liquidation of land tax increase, because the government department refused to hand it over, the enterprise did not reasonably plan and dispose of the underground civil air defense, which made it difficult to deduct the cost, and in order to reduce the tax burden, the land cost was fully apportioned to other properties, but this apportionment method was not supported by facts and laws, so the tax enterprise dispute mentioned in the case arose.
Here, the suggestions for real estate enterprises on the underground civil air defense parking spaces are as follows: (1) be familiar with the relevant policies and management regulations of the local air defense department, and analyze and predict in advance in combination with the land tax increase policy; (2) in the process of land acquisition, take the cost sharing of public supporting facilities represented by civil air defense into the key consideration scope in advance, and determine whether it is necessary to clearly stipulate the price of each beneficiary object in the contract terms; (3) after the completion of the project, arrange the disposal of civil air defense and other public supporting facilities in advance, so as to avoid the cost of liquidation without reasonable arrangements and cannot be deducted; (4) the tax authorities should communicate well, protect their own rights and interests in a reasonable, effective and restrained manner, and find a professional team to assist if necessary。