Deed tax is a kind of property tax levied on the bearer of ownership by transferring land and housing ownership in the territory, which is closely related to the lives of the people. When it comes to deed tax, the most common questions are roughly the following: Under what circumstances do deed taxes need to be paid? How is deed tax calculated? When is deed tax paid? If the transaction cannot be carried out due to contractual problems, can I get a tax refund? This article briefly sorts out the above issues on the basis of the Deed Tax Law of the People's Republic of China (hereinafter referred to as the Deed Tax Law) and the Announcement of the State Administration of Taxation of the Ministry of Finance [2021] No. 23 on the Implementation of the Implementation Caliber of several matters of the Deed Tax Law.
1. Under what circumstances do deed taxes need to be paid?
As long as the ownership of land and housing is transferred, the units and individuals who bear the burden shall pay deed tax. The specific circumstances in which the transfer occurs include: the transfer of land use rights; the transfer of land use rights in the form of sale, gift, and exchange; the sale, purchase, donation, and exchange of houses; and the transfer of land and housing ownership by way of investment, debt repayment, transfer, and reward.
However, Article 6 of the Deed Tax Law stipulates the circumstances in which deed tax is exempted, such as the exemption of deed tax by some non-profit institutions, the change of land and house ownership between husband and wife during the existence of the marriage relationship, and the exemption of deed tax on land and house ownership by legal heirs through inheritance.
2. How is deed tax calculated?
Deed tax is calculated based on two factors: the tax basis of deed tax and the tax rate.
(1) Basis for tax calculation
Article 4 of the Deed Tax Law stipulates the basis for calculating taxes under different circumstances, and compared with the original Deed Tax Regulations, Article 4 of the Deed Tax Law stipulates the basis for calculating deed taxes for the transfer of state-owned land use rights, the sale of land use rights, and the sale and purchase of houses:
It can be seen from the above provisions that the tax basis for deed tax is the contract transaction price, and the transaction price is defined in detail in the Deed Tax Law, that is, including the currency to be delivered and the price corresponding to physical and other economic benefits, making this clause more comprehensive and rigorous.
Announcement 23 elaborates on the specific circumstances of the tax basis, such as the deed tax basis for bearing the renovated house, which clarifies that the cost, including the renovation cost, should be included in the total price payable by the bearer. In the actual purchase transaction, in order to pay less tax, many parties calculate the decoration cost separately from the house payment cost and reflect it separately in the contract. However, after the implementation of the Deed Tax Law, when purchasing a renovated house, whether the contract stipulates that the decoration cost will be calculated together with the house price or separately and separately, the decoration cost shall be included in the tax calculation basis in accordance with the provisions of the law, and the deed tax shall be levied together.
Announcement No. 23 echoes the new content of Article 4 of the Deed Tax Law and clearly determines the tax basis for deed taxation, so as to reduce disputes in operation.
(2) Tax rate
During the drafting of the Deed Tax Law, many housing agents spread the statement that "the deed tax rate will face a substantial increase in the future, and the purchase tax will be heavier in the future". With the official promulgation of the Deed Tax Law, rumors have broken themselves. The deed tax rate has not been raised, and the tax rate stipulated in the Deed Tax Law is consistent with the previous 3%-5% tax rate of the Deed Tax Interim Regulations, but the applicable tax rate of each province is determined by the provincial people's government and changed to be proposed by the provincial people's government and reported to the Standing Committee of the People's Congress at the same level for decision, and the filing authority is also adjusted from the Ministry of Finance and the State Administration of Taxation to the Standing Committee of the National People's Congress and the State Council.
The preferential tax rate policy previously stipulated in Cai Shui [2016] No. 23 "Notice of the Ministry of Finance and the State Administration of Taxation and the Ministry of Housing and Urban-Rural Development on Adjusting the Preferential Policies for Deed Tax business tax in real estate transactions" has not been abolished, so now individuals who purchase the only house of the family can still enjoy a preferential tax rate of 1% or 1.5%. [1] Due to the difference in the current situation of housing purchases in different regions, the tax rate of 3%-5% is not "one-size-fits-all", and the law allows provinces, autonomous regions and municipalities directly under the Central Government to determine the differential tax rate for the transfer of ownership of different entities, different regions and different types of housing in accordance with the procedures provided for in the preceding paragraph.
3. When is deed tax paid?
This issue concerns the timing of deed tax obligations and the determination of deed tax payment periods.
(1) The time when the tax obligation occurs
Article 8 of the original Deed Tax Regulations and Article 9 of the Deed Tax Law stipulate the same: The time of occurrence of the deed tax obligation is the same as the day on which the taxpayer signs the land or housing ownership transfer contract, or the day on which the taxpayer obtains other certificates of the nature of the land or housing ownership transfer contract.
However, there has always been a great controversy in practice on this issue. The main disagreement lies in the inconsistent understanding of "other certificates of the nature of the land and housing ownership transfer contracts".
The first understanding: In practice, most people understand it as a "contract for the sale and purchase of a house", so it is determined that the tax liability occurs on the date of signing the contract. [2]
For example, in the (2018) Minhang Shen No. 532 and (2020) Su 8601 Xingchu No. 888 cases, the court regarded the time of signing the contract for the sale and purchase of commercial housing as the time of occurrence of the tax obligation, holding that according to Article 8 of the Deed Tax Regulations, the deed tax obligation occurred when the cause of the change in property rights was the time of signing the contract for the sale and purchase of commercial housing, not the time when the change in property rights occurred.
Second understanding: In some cases, the court understood Article 8 of the Contract Ordinance as "the certificate of property rights of the house", and the time of the tax obligation was recognized as "when the property right was registered". [3]
For example, in the (2018) Ji 04 Min Zhong No. 3589 case, the court held that according to article 8 of the Interim Regulations on Deed Taxation, the signing of the contract for the sale and purchase of housing should not be taken as the standard, but the acquisition of the ownership transfer contract or certificate should be the standard. Therefore, the taxes and fees involved in the case are the relevant fees that should be paid to the state after the transaction of the house sale and purchase of the two parties and the ownership certificate are processed.
In fact, as for the time of occurrence of tax obligations, the provisions in the original Deed Tax Ordinance and the Deed Tax Ordinance Are Clear. Article 18 of the original "Detailed Rules for Deed Tax Regulations" stipulates that other certificates of the nature of land and housing ownership transfer contracts referred to in the regulations refer to contracts, agreements, contracts, documents, confirmations and other certificates determined by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government.
The eleventh article of the original Deed Tax Regulations stipulates that taxpayers shall register the change with the relevant departments with the deed tax payment certificate, etc. The deed tax payment certificate is a tax payment certificate issued to the buyer by the tax department responsible for collecting the tax on real estate transactions. This also confirms that the time of occurrence of tax obligations cannot be "when property rights are registered", because only after tax declaration and payment can the change of ownership be registered.
Articles 8 and 10 of the original Deed Tax Ordinance and Article 18 of the Deed Tax Ordinance define a clear deed tax payment process:
After the implementation of the Deed Tax Law, the Deed Tax Ordinance and its detailed rules were repealed, but the provisions of the Deed Tax Law on the time of occurrence of tax obligations have not changed from the Deed Tax Ordinance, that is, "the date on which the buyer signs the contract or obtains the certificate with the validity of the contract".
(2) Tax payment period
The deed tax ordinance compares with the deed tax law's provisions on the tax payment period as follows:
The Deed Tax Law follows the principle of "tax first and then certificate" in the Deed Tax Ordinance, combines the declaration period and the tax payment period into one, and stipulates that deed tax is declared and paid "before the registration of land and housing ownership", which facilitates the declaration and payment of tax. In addition, Announcement No. 23 effectively supplements the filing time under specific circumstances.
Fourth, there are problems in the purchase contract that make the transaction impossible to proceed in the end, can it be refunded?
The main bases for the deed tax refund issue before 1 September 2021 are: Guo Shui Letter [2002] No. 622, Guo Shui Letter [2008] No. 438, Cai Shui [2011] No. 32.
The Deed Law and Announcement No. 23 continue the spirit of the above documents and improve the above contents. The main contents of the provisions on tax rebates in the Deed Tax Law are: If the ownership transfer contract or the certificate of the nature of the ownership transfer contract or the ownership transfer contract does not take effect, is invalid, revoked or terminated before the registration of land and housing ownership in accordance with the law, the taxpayer may apply to the tax authority for the refund of the tax paid, and the tax authority shall handle it in accordance with law.
Compared with Cai Shui [2011] No. 32, Announcement No. 23 only recognizes the circumstances in which tax refunds are available on the basis of court judgments, and also adds the requirement for tax refunds due to the refund of the price.
[1] Article 1 of the Notice of the Ministry of Finance, the State Administration of Taxation and the Ministry of Housing and Urban-Rural Development on Adjusting the Preferential Policies for Deed Tax and Business Tax in Real Estate Transactions stipulates:
1. Regarding deed tax policy
(1) Deed tax is levied at a reduced rate of 1% for individuals who purchase the only house in the family (the scope of family members includes the buyer, spouse and minor children, the same below), with an area of 90 square meters or less, and a deed tax at a reduced rate of 1.5%.
(2) Deed tax shall be levied at a reduced rate of 1% for individuals who purchase the second improved housing of the family with an area of 90 square meters or less, and deed tax at a reduced rate of 2% for an area of 90 square meters or more.
The second improved housing for the family refers to the family that already owns one house and buys the second house of the family.
[2] For details, see cases such as Case (2020) Su 8601 Xingchu No. 888, (2018) Guixing Shen No. 235, (2018) Heixingshen No. 360, (2018) Minxing Shen No. 532, etc.
[3] For details, see (2018) Ji 04 Min Zhong No. 3589, (2018) Chuan 19 Min Zhong No. 61 and other cases.
This article is original to Xinghan, if you need to reprint, please contact first.