1. China Tax News, "Relevant Experts and Tax Authorities Suggest Real Estate Enterprises: Dealing with Common Tax Issues in the Industry in Compliance"
Source: China Tax News 2020-08-28 B2 edition
On the afternoon of August 14, the China Tax Research Institute of Large Enterprises, together with the Hefei International Tax Research Association and the Hefei Taxation Society, jointly held a seminar on tax policies for real estate development enterprises in the Yangtze River Delta region in Hefei. The experts at the meeting conducted in-depth discussions on the hot and difficult issues in the practice of real estate enterprises. Relevant experts and tax authorities said that as long as real estate companies find the right method, they can deal with common tax issues in the industry in compliance.
Is "Hold All" a point-in-time condition or a time-of-time condition?
In practice, it is common for a real estate development enterprise to acquire land and hand it over to the project company for development.
After the receipt of the land transfer fee is issued to the real estate development parent company, if the project subsidiary wants to deduct the land price when confirming the sales amount, it must meet the three conditions stipulated in the "Cai Shui [2016] No. 140). One of the conditions is that the entire equity of the project company is held by the real estate development enterprise that has transferred the land. Lu Zhijun, tax director of Zhongliang Real Estate, proposed that "all holding" only needs to be satisfied at a certain point in time such as delivery or payment, or must it be satisfied in the whole life cycle of the project?
The reporter learned that due to the needs of financing and cooperative developers, real estate projects often increase capital and expand shares by transferring equity by old shareholders or directly introducing new shareholders after the land is auctioned. In practice, it is difficult to require enterprises to maintain the same shareholding structure throughout the development cycle. In this regard, Wei Bin, deputy director of the China Large Enterprise Tax Research Institute, analyzed that the reason why such difficult problems occur in the real estate industry is mainly because of the differences in policy implementation in different regions.
Liu Yi, a cadre of the Cargo and Labor Division of the Anhui Provincial Taxation Bureau of the State Administration of Taxation, has been exposed to many such problems in his work. He said that for such "intractable diseases", enterprises can jump out of the complicated differences between real estate and fiscal and taxation laws, and look at and solve them flexibly. For example, the establishment of a project subsidiary as soon as possible, and the corresponding agreement on the payment of the balance after the auction deposit and the acquisition of financial bills will be "front-loaded" in the port of solving the problem. At the same time, it is recommended that enterprises actively communicate with relevant government departments to form a benign interaction, and prepare sufficient and legal vouchers and bases for subsequent enterprises to deduct the land price paid to government departments according to regulations.
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2. Guidelines for Tax Compliance of the Pilot Industries of the State Administration of Taxation of Guangdong Province - Real Estate Industry
In November 2017, the Guangdong Provincial State Taxation Bureau and the Guangdong Provincial Department of Finance issued the Tax Compliance Guidelines for Pilot Industries of the VAT Reform with VAT Reform – Real Estate Industry, of which Part IV "Tax-related Risks of Sales Recognition" Article 15.2.3 contains:
4. The project company mistakenly deducted the land price
After the project company has accepted the land price paid by the real estate development enterprise in accordance with Article 8, if the equity transfer occurs so that the equity of the project company is no longer fully held by the real estate development enterprise, it will no longer comply with the provisions of Article 8 of Cai Shui [2016] No. 140. Therefore, when filing tax returns, the project company of a real estate development enterprise should determine whether it meets the three conditions stipulated in Article 8 of Cai Shui [2016] No. 140 at the same time, so as to confirm whether the corresponding land price can be deducted from the current sales amount.
3. Guidelines for Tax Compliance of Large Enterprises (Real Estate Groups) issued by the First Branch of Wuxi Municipal Taxation Bureau
On September 2, 2019, the First Branch of the Wuxi Municipal Taxation Bureau of the State Administration of Taxation issued two brochures, "Tax Compliance Guidelines for Large Enterprises (Real Estate Groups)" and "Tax Compliance Guidelines for Large Enterprises (Real Estate Industry)", as operational guidelines for the real estate industry to conduct tax-related risk self-examination.
1. Tax factors are not taken into account in the establishment of the project company
Risk description: After the real estate group acquires the land, it establishes a project company for development, without considering the tax impact in advance, and the establishment of the project company does not comply with the relevant regulations, resulting in the failure to deduct the land price in accordance with the provisions when calculating and paying the value-added tax.
Important reminder: Article 8 of Cai Shui [2016] No. 140 stipulates that after a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, a project company shall be established to develop the transferred land, and if the following conditions are met, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations.
(1) The real estate development enterprise, the project company and the government department sign a change agreement or supplementary contract to change the land transferee to the project company.
(2) Under the condition that the use, planning and other conditions of the land transferred by the government department remain unchanged, the total land price shall remain unchanged when the modification agreement or supplementary contract is signed.
(3) The entire equity of the project company shall be held by the real estate development enterprise of the transferred land.
The above three conditions must be met at the same time, otherwise the calculation and payment of the difference in VAT will be affected.
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4. Fujian Provincial Taxation Bureau: January 2023 12366 Consultation Hot and Difficult Issues Collection
24. Our company is a real estate enterprise, the parent company authorizes the project subsidiary to develop after the land auction, and the subsidiary can deduct the land price paid by the parent company to the government according to the provisions of the value-added tax. Now if the subsidiary wants to change its equity, after the change, it will not be 100% owned by the parent company, can the subsidiary still deduct the land price?
Answer: According to the provisions of the "Cai Shui [2016] No. 140): "8. After a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land. ”
Therefore, after the change of equity, the above conditions are not met, and the project subsidiary cannot deduct the land price.
5. Hubei Provincial Taxation Bureau 12366
Question content: Cai Shui [2016] No. 140 stipulates: "After a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations." …… (3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land. "Is there a clear time period for the entire equity of the project company to be held by the real estate development enterprise of the transferred land, and whether it is the time when the Land Bureau transfers the consortium to the project company, and whether the entire equity of the project company is held by the real estate development enterprise that receives the land, or whether the project company must ensure that the entire equity of the project company is held by the real estate development enterprise that has transferred the land from the beginning to the end?
Respondent: Hubei Provincial Taxation Bureau
Reply time: 2020-10-15
Reply content: Hubei tax 12366 tax service hotline reply: Hello! Your question has been received, and the reply to the information you provided is as follows:
On the question of whether there was a clear time period, the document did not specify it further.
According to Article 8 of the document (CS [2016] No. 140), after a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
6. Ningbo Municipal Taxation Bureau 12366
Question content: Hello, please ask a question: After our company acquires the land, a wholly-owned subsidiary of our company will set up a wholly-owned project company with 100% equity to develop, whether Article 8 of Cai Shui [2016] No. 140 is applicable, "...... (3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land. "The rules?
Respondent: Ningbo Municipal Taxation Bureau
Response time: 2021-10-20
Reply: Hello! Your question has been received, and the reply to the information you provided is as follows:
If a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department after receiving the transferred land, it establishes a project company to develop the transferred land, and if the following conditions are met, the project company may deduct the land price paid by the real estate development enterprise to the government department in accordance with the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
The information you submit is not exactly the same as the above. It is suggested that for specific questions, please bring relevant information and ask your competent tax bureau to make a judgment.
7. Xiamen Municipal Taxation Bureau 12366
Question content: Cai Shui [2016] No. 140: 8. After a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations. (1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company; (B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged; (3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
Company A established a wholly-owned project company A after auctioning the land, signed a tripartite agreement with the government to change the land transferee to project company A, and transferred 49% of the equity to company B half a year later, will the change of equity affect the deduction of the land price on the VAT of project company A?
Respondent: Xiamen Municipal Taxation Bureau
Reply time: 2020-08-19
Reply content: Xiamen 12366 Tax Service Center of the State Administration of Taxation replied: Dear taxpayers (withholding agents, payers) Hello! The online message consultation you submitted has been received, and the reply is as follows:
will affect. In accordance with Article 8, after a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department in accordance with the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
If Company A transfers 49% of the equity to Company B, it does not meet the requirements of "the entire equity of the project company is held by the real estate development enterprise that has transferred the land." "The request.
8. Letter from the Shenzhen Municipal Taxation Bureau of the State Administration of Taxation on the reply to the No. 20220181 recommendation of the second session of the Seventh Municipal People's Congress
Dear Representative Zeng Yufang,
Your "Proposal on Providing a Channel for Changing the Holder of Non-tax Revenue Bills for Land Premium" (No. 20220181 Proposal of the Second Session of the Seventh Municipal People's Congress) has been received. After study, we hereby reply to the relevant situation of the proposed handling as follows:
According to Article 8 of the "Cai Shui [2016] No. 140), after a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations. (1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company; (B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged; (3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land. It has clearly regulated how to deal with the inconsistency between the bidding, auction and listing entity and the actual development entity. In view of the fact that the normative documents such as the tax policy system are jointly issued by the Ministry of Finance and the State Administration of Taxation, we, as the executive authority of Shenzhen, will truthfully give feedback to the higher authorities.
Thank you for your interest and support in tax work.
Shenzhen Municipal Taxation Bureau, State Administration of Taxation
June 30, 2022
9. Anhui Provincial Taxation Bureau 12366
(1) Whether the real estate development cost project company is a branch or not, whether a tripartite agreement has been signed
Question content: Hello, I am a real estate development enterprise (hereinafter referred to as enterprise A), in August 2020, I won the bid for a government resettlement housing project development project, and in December 2020, when I asked the government for the first time, I requested to set up a branch office at the location of the project, but at that time, enterprise A who won the bid to acquire the land had already paid the land transfer fee and obtained the administrative receipt of the land transfer fee. According to Article 8 of Cai Shui [2016] No. 140, after a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department for the transferred land, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate developer to the government department in accordance with the regulations. Since enterprise A is a branch office and a subsidiary with non-independent accounting, does it still need to sign a tripartite agreement?
Respondent: Anhui Provincial Taxation Bureau
Response time: 2021-01-05
Reply content: Anhui Provincial Taxation Bureau of the State Administration of Taxation 12366 Tax Service Center replied: Hello! Your question has been received, and the reply to the information you provided is as follows:
If a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department after receiving the transferred land, it establishes a project company to develop the transferred land, and if the following conditions are met, the project company may deduct the land price paid by the real estate development enterprise to the government department in accordance with the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
If your enterprise establishes a project company to develop land, it shall be implemented in accordance with the provisions of the document, and the land price can be deducted by the project company.
(2) The group company handles the land payment bills on behalf of the subsidiary
Question content: Our company is a newly established real estate development enterprise (project company), the original parent company (parent company) obtained a piece of land through bidding, auction and listing, the land transfer contract was signed with the project company, and the relevant non-tax bills were issued to the project company, and the remaining land payment was paid directly by the parent company (group company) of the parent company to the non-tax account where the project company is located. At present, the new non-tax system can only issue non-tax bills to payers (i.e. group companies). Can the land payment bill be deducted from the project company's value-added tax, land increase tax and enterprise income tax? What documents do I need to prepare?
Respondent: Anhui Provincial Taxation Bureau
Reply time: 2019-04-12
Reply content: Anhui tax 12366 tax service hotline:
Hello dear taxpayers, your questions have been received.
Value-added tax: (CS [2016] No. 140) stipulates: "8. After a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land. ”
Enterprise income tax: The document does not clearly stipulate the relevant content, with reference to the VAT regulations, it can be used as a pre-tax deduction voucher for enterprise income tax, and it is recommended to communicate with the competent tax authorities for specific matters.
Land Appreciation Tax: The land payment bill can be used as the basis for the deduction of the project company's calculation of Land Appreciation Tax.
In addition, in addition to the general information, other information required by the competent tax authorities shall be attached.
(3) The tax treatment of the real estate company after the land payment paid by the parent company is transferred to the real estate company
Date:2019-10-30 Source:Anhui Provincial Taxation Bureau
Q: Our company is a real estate enterprise, when the parent company paid half of the land price on behalf of the parent company and turned it into investment, but the receipt issued by the land department is headed by the name of the parent company, will it affect the VAT output credit of the land price later? Does it affect the deduction of land costs in LAT liquidation? Thank you!
Answer: Anhui Province 12366 Tax Service Center of the State Administration of Taxation replied: Dear taxpayers (withholding agents, payers) Hello! The online message inquiry you submitted has been received, and the reply is as follows.
Value-added tax: According to Cai Shui [2016] No. 140, after a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company can deduct the land price paid by the real estate development enterprise to the government department according to the regulations.
(1) The real estate development enterprise, the project company, and the government department sign a change agreement or supplementary contract to change the land transferee to the project company;
(B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged;
(3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
Land Appreciation Tax: The land payment bill can be used as the basis for the deduction of the project company's calculation of Land Appreciation Tax. However, it is necessary to provide the relevant information required by the local tax department, which can be verified with the local government in detail.
10. Cargo and Labor Department of Fujian Provincial Taxation Bureau: Answers to Questions Concerning the VAT Reform of Real Estate Enterprises (2)
Date:2017-01-19 Source:Fujian Provincial Taxation Bureau
19. Company A won the land plot A, paid the land transfer fee in the name of Company A, and received the land transfer bill headed to Company A, and now Company A has established Project B Company to operate the land plot A, and the land department allows the land owner to be changed to Company B, and the value-added tax of Company B adopts the general tax calculation method. Can Company B calculate VAT based on the difference in the land transfer money bills made payable to Company A? If Company A transfers the equity of Company B to Company C, can Company B calculate the VAT difference in the amount of the land transfer bill made payable to Company A?
Answer: 1. According to the real estate development enterprise (including a consortium composed of multiple real estate development enterprises) after paying the land price to the government department, the project company shall establish a project company to develop the transferred land, and if the following conditions are met, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations: (1) the real estate development enterprise, the project company and the government department shall sign a change agreement or supplementary contract to change the land transferee to the project company; (B) the government departments to transfer the land use, planning and other conditions unchanged, when signing the change agreement or supplementary contract, the total price of the land remains unchanged; (3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
2. According to the law, taxpayers who transfer the land use rights obtained before April 30, 2016 can choose to apply the simplified tax calculation method, and the balance of the total price and off-price expenses obtained minus the original price of the land use rights obtained is the sales amount, and the VAT is calculated and paid at a rate of 5%. Therefore, in addition to asset restructuring, the transfer of land use rights between different taxpayers shall be subject to VAT on the sale of intangible assets, and the special VAT invoice obtained by the purchaser can be used as a voucher for input deduction.
11. Beijing Municipal Taxation Bureau: 17 Hot Issues on Value-Added Tax, Enterprise Income Tax and Tax Collection and Administration (Beijing State Taxation Answer No. 12366, February 2018)
3. Stipulates: "After a real estate development enterprise (including a consortium composed of multiple real estate development enterprises) pays the land price to the government department, and establishes a project company to develop the transferred land, and meets the following conditions, the project company may deduct the land price paid by the real estate development enterprise to the government department according to the regulations." …… (3) The entire equity of the project company shall be held by the real estate development enterprise that has transferred the land. "Is there a clear time period for the entire equity of the project company to be held by the real estate development enterprise of the transferred land, and whether it is the time when the Land Bureau transfers the consortium to the project company, and whether the entire equity of the project company is held by the real estate development enterprise that receives the land, or whether the project company must ensure that the entire equity of the project company is held by the real estate development enterprise that has transferred the land from the beginning to the end?
Answer: When a real estate development enterprise (including a consortium composed of multiple real estate development enterprises), the project company and the government department sign a change agreement or supplementary contract to change the land transferee to the project company, the entire equity of the project company shall be held by the real estate development enterprise that has transferred the land.
Note: Except for Beijing, the response is generally tight, that is, it is required to maintain the full shareholding of the parent company when the land price is offset against sales. In practice, there are actually many acts of capital increase and share expansion and equity transfer, if it has been put on the table, either silently and with luck, or strive to break the net on the basis of reason, in short, it is full of uncontrollability. If you have the idea of equity that has not yet been implemented and only considers the factors of the tax law, you may wish to try unconventional means such as equity holding.
On the contrary, in the case that the bill is headed by the parent company, some tax bureaus will recognize it, especially the enterprise income tax deduction. But these are all "other people's children", and I really don't know what kind of father I will be on the stall. Therefore, make a plan in mind first, and work hard from the direction of substance over form.
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