Article 4 of the "Deed Tax" stipulates that the basis of the deed tax is the transfer and sale of land use rights, the sale and purchase of houses, and the transaction price determined for the contract for the transfer of land and house ownership, including the currency to be delivered, the price corresponding to the goods in kind and other economic benefits. In addition, according to Article 2 (5) of the Announcement of the State Administration of Taxation of the Ministry of Finance [2021], "if the land use right is transferred, the tax basis includes the land transfer fee, land compensation fee, resettlement subsidy, compensation fee for above-ground attachments and seedlings, expropriation compensation fee, urban infrastructure supporting fee, housing in kind and other currencies to be paid, as well as the price corresponding to physical and other economic benefits." There are many "physical houses" of "real estate enterprises", such as public supporting facilities, civil air defense, demolition and resettlement housing, compulsory public rental housing and "competition" housing. This article discusses whether real estate enterprises pay deed tax and the collection and management of deed tax.
1. Whether the deed tax is paid for the "housing built in kind".
Whether or not to pay deed tax for "houses built in kind" should be distinguished into the following five different situations:
1. Public facilities. Public supporting facilities mainly refer to the public supporting facilities that should be handed over to relevant government departments or belong to all owners after completion, including housing for neighborhood committees and police stations, clubs, parking lots (libraries), property management sites, substations, heating stations, water plants, cultural and sports venues, schools, kindergartens, nurseries, hospitals, post and telecommunications and other public facilities developed and constructed by real estate development enterprises and supporting liquidation projects. Although in the old and new deed tax provisions, the physical construction needs to be paid as the transaction price of the land use right, but such public supporting facilities are enjoyed by all owners, and the cost factor of public supporting facilities has been included in the housing price, so it is generally not considered to be the physical construction of the deed tax, and it is not considered that such public supporting facilities are related to the cost of acquiring land, and the tax treatment is not included in the compensation for land acquisition and demolition.
2. Equipped with civil air defense. According to the provisions of the "Regulations on Regulating the Charges for the Ex-situ Construction of Air Defense Basements", "all civil construction projects shall be constructed simultaneously with the provisions of the air defense basements", and if the air defense basement cannot be built due to the restrictions of objective conditions such as geology, topography, and construction, the construction unit must report to the competent civil air defense department for approval; If the construction is not carried out after approval, the construction unit shall, in accordance with the standards prescribed by the state and the province, pay the civil air defense project relocation construction fee to the competent civil air defense department, and the competent department of civil air defense shall uniformly organize the relocation construction. The basic principle of the deed tax basis in the Deed Tax Law and Announcement No. 23 is determined by the transaction price. Announcement No. 23 classifies and summarizes the transaction prices of land transfers, including "land transfer fees, land compensation fees, resettlement subsidies, compensation fees for above-ground attachments and seedlings, expropriation compensation fees, urban infrastructure supporting fees, and houses built in kind", but does not include "civil air defense fees for relocation construction fees". The "civil air defense off-site construction fee" is approved to be paid under the condition that the air defense basement cannot be built, and it is not necessary to pay it in the case of building an air defense basement, so there is an answer, so in the case of building an air defense basement, there is no need to pay the "civil air defense off-site construction fee", and the construction of the air defense basement has no necessary relationship with whether or not to transfer the land, therefore, the construction does not constitute the inevitable content of the establishment of the land transaction consideration. Therefore, in the case of the actual construction of an air defense basement, there is no basis for paying the deed tax, and it is inferred that the "civil air defense construction fee in different places" is only a monetized "air defense basement construction", which does not belong to the inevitable price factor for the establishment of the transaction price of the transferred land, and therefore does not constitute an inevitable part of the transaction price of the transferred land; In addition, civil air defense is the principle of "who invests who earns", and the income from civil air defense investment still belongs to the developer, and it does not belong to the nature of free construction, so the cost of civil air defense cannot be used as the basis for calculating the deed tax.
3. Demolition and resettlement housing. It is easy to understand that the compensation for demolition and relocation generally includes monetary compensation and compensation in kind, and the value of monetary compensation is generally determined by the market price of similar real estate of the expropriated house, and compensation in kind is also a form of compensation, which is equivalent to two businesses of purchasing and developing commercial housing with monetary compensation and then purchasing and developing commercial housing with monetary compensation. Therefore, when determining the basis of deed tax, whether it is monetary compensation or compensation in kind, it is the price paid for the acquisition of land and should be incorporated into the deed tax basis. However, in the case of compensation in kind, how should the compensation in kind be converted into monetary compensation, that is, how to determine the price of the house built in kind? Compensation in kind shall be based on the consideration between the house to be demolished and the house to be rebuilt at the time of signing the contract, so it should be confirmed according to the market price of the same type of house at the time of signing the agreement, and cannot be determined according to the market price of the same type of house at the time of physical delivery. For example, Hubei Province stipulates that for real estate development enterprises to deliver houses to the owners to be demolished, they shall calculate and pay VAT separately on the basis of each house to be rebuilt: (1) If the real estate development enterprise delivers the houses to the owners who have been demolished and rebuilt, and the actual area is greater than the area agreed in the agreement on demolition and reconstruction, the average unit price of the excess area actually collected shall be used as the taxable value of the rebuilt houses. (2) If the real estate development enterprise delivers the house to the owner to be demolished, and the actual area is the same as the area agreed in the demolition and rebuilding agreement, the average unit price of the same or similar house on the same floor shall be used as the taxable value. (3) If the real estate development enterprise delivers the house to be rebuilt to the owner to be demolished, and the actual area is less than the area agreed in the agreement on demolition and reconstruction, the average unit price of the insufficient part of the area actually returned by the real estate development enterprise to the owner of the demolished property shall be used as the taxable value of the house to be rebuilt. (4) The taxable value of the house to be rebuilt shall not be lower than the cost price of the house. The sales income from the sale of houses rebuilt in kind is the consideration relationship with the cost of compensation for demolition, and the income from the sale of immovable property is recognized according to the market price of similar houses at the time of signing the agreement on the one hand, and the cost of demolition and relocation on the other hand. For those involved in premium: the real estate enterprise receives the premium, and the demolition cost will be reduced accordingly; Payment of premium increases the cost of demolition.
4. Compulsory public rental housing. Since 2011, the central and local governments have made it clear that the construction of affordable housing will be a precondition for land acquisition and a mandatory means of access in the process of commercial housing construction. The national and local governments may, in accordance with the local housing security needs, formulate the proportion and standards for the construction of public rental housing for commercial housing projects. In some places, public rental housing is not built in kind, and the transferee shall pay a certain proportion of the starting price of the residential part of the parcel to pay the construction fund for centralized public rental housing. For real estate enterprises, the payment of funds for the construction of public rental housing shall be incorporated into the deed tax basis. For public rental housing built in kind: if the real estate enterprise builds a house for the government on behalf of the government, whether inside or outside the project, the initial property right of the public rental housing is the government housing management center, then the construction cost paid by the real estate enterprise for the government to build the house must be used as the deed tax basis, and the deed tax shall be paid, and if the government pays a certain compensation, the land cost shall be offset and the deed tax basis shall be reduced accordingly; If a real estate enterprise builds a house for the government on behalf of the government, whether in the project or outside the project, and the real estate enterprise is the subject of project initiation and approval, and the government buys back the house with a certain amount (which may be equal to or lower than the cost price of construction and installation in practice) when the house is handed over, it means that when the real estate enterprise acquires the land, the land listing price has included the land price of the public rental house, and the government collects it normally, so it does not pay the deed tax.
5. "Competition" for talent housing, public rental housing, affordable housing and commercial buildings. It is also easy to understand that in the physical allocation of non-resettlement under the mode of "limited land price and competitive allocation", the land is transferred to the name of the development enterprise, and the property rights are transferred by the development enterprise to the relevant government departments free of charge after the completion of the allocation, and the cost incurred is essentially the cost of acquiring the land, which should be recognized as the cost of obtaining the land use right, and the deed tax shall be calculated and paid according to the construction cost of the enterprise and incorporated into the transaction price and included in the deed tax.
2. Problems in the collection and management of deed tax payment for "houses built in kind".
In practice, when the land acquired through "bidding, auction and listing" is generally carried out, the tax authorities usually levy deed tax according to the land auction price when going through the procedures for the transfer of land property rights. Because the "physical allocation of housing" occurs after the fact, when handling the property rights, the tax authorities cannot determine the cost, but there is no property rights after the fact, how to confirm the time of deed tax payment? According to the provisions of the Deed Tax Law, the deed tax payment time is to declare and pay the deed tax before going through the registration procedures for land and house ownership in accordance with the law. In addition, according to the provisions of the Announcement No. 23 of 2021 of the Ministry of Finance and the State Administration of Taxation: (1) If the ownership of land or housing is transferred due to the effective legal documents issued by the people's courts and arbitration commissions or the supervision documents issued by the supervision organs, the tax liability shall occur on the effective date of the legal documents. (2) Where the deed tax that has been reduced or exempted shall be paid due to the change of land or housing use, the tax liability shall occur on the date of the change in the use of the land or housing. (3) If the land transfer price needs to be paid due to the change of land nature, floor area ratio and other land use conditions, and the deed tax shall be paid, the tax liability shall be incurred on the date of the change of land use conditions. In the event of the above-mentioned circumstances, if it is no longer necessary to register the ownership of land and housing according to the regulations, the taxpayer shall declare and pay the deed tax within 90 days from the date of occurrence of the tax liability. "Housing in kind" obviously does not belong to any of the three situations listed above, therefore, "housing in kind" should be declared and paid before the registration of land ownership. This raises the issue of the division of liability for failure to pay the deed tax in a timely manner.
For the land acquired by real estate enterprises through "bidding, auction and listing", the registration of property rights is "tax first and then certificate", that is, before handling property rights, they must first pay the deed tax at the tax authorities in accordance with the law before they can handle the property rights registration. Therefore, before the registration of property rights, whether to pay the deed tax and how much deed tax to pay is checked by the tax authorities. However, in practice, the cost of "housing in kind" cannot be determined, so when the property rights are registered, the tax authorities often do not incorporate the cost of "housing in kind" into the deed tax calculation basis, resulting in the tax authorities undercalculating the deed tax when "checking", and the responsibility lies entirely with the tax authorities, according to Article 52 of the "Regulations", if the taxpayer fails to pay or underpays the tax due to the responsibility of the tax authority, the tax authority may require the taxpayer and the withholding agent to pay the tax within three years, but shall not impose a late fee.
Based on this, the author suggests that in the link of "tax before certificate", the tax authorities should, in accordance with the land transfer agreement, verify the cost of the "physical construction of houses" that should be included in the deed tax, and incorporate the deed tax into the deed tax calculation basis in the process of property rights transfer, so as to avoid "losing the penny and going to the ship", and at the same time effectively avoid the risk of tax law enforcement.
Author: Ji Hongkui, Unit: Zhonghui Wuhan Tax Agent Office Shiyan Office. The content of this article is for general information purposes only and is not intended as formal auditor, accounting, tax or other advice, and we cannot guarantee that such information will remain accurate in the future. No person should act on the basis of the information contained herein without having due regard to the relevant circumstances and obtaining appropriate professional advice. The articles reproduced in this issue are for academic exchange purposes only. The original copyright of the article or material belongs to the original author or original copyright owner, and we respect copyright protection. If you have any questions, please contact us, thank you!