DETAILED RULES FOR THE IMPLEMENTATION OF THE ROVISIONAL REGULATIONS OF THE PEOPLE'S REPUBLIC OF CHINA ON LAND APPRECIATION TAX

                                     [State Council: 13 December 1993]

Article 1
These Rules are formulated in accordance with Article l4 of the "Provisional Regulations of the People's Republic of China on Land Appreciation Tax" (hereinafter referred to as the Regulations).

Article 2
The "transfer of State-owned land use rights, buildings and their attached facilities and income there from" as mentioned in Article 2 of the Regulations refers to the sale or other paid transfer of the real estate. It does not include the transfer of a real estate through inheritance or gifting without charge.

Article 3
The "State-owned land" as mentioned in Article 2 of the Regulations refers to land defined as such by the State Law.

Article 4
The "buildings" as mentioned in Article 2 of the Regulations refer to all buildings constructed on the land, including all kinds of attached facilities above and under ground.

The "attached facilities" mentioned in Article 2 of the Regulations refer to all installations on the land which cannot be removed and shall be damaged once removed.

Article 5
The "income" as mentioned in Article 2 of the Regulations refers to all the payment and related proceeds received from the transfer of the real estate.

Article 6
The "units" as mentioned in Article 2 of the Regulations refer to all kinds of enterprises, institutions, government organs, social groups and other organizations.

The "individuals" as mentioned in Article 2 of the Regulations include se1f-employed business peop1e.

Article 7
The "deductible items in computing the appreciation amount" as stipulated in Art1cle 6 of the Regulations are spec1fled as fo1lows:

1. The lease price paid for the use 0f the land refers to the amount pa1d by the taxpayer for obtaining the land-use right and related expenses paid according to State regulations.

2. The costs and expenses spent for the development of land and the construction of new buildings and faci1ities (hereinafter referred to as real estate deve1opment for short) refer to the real costs borne by the taxpayer for the land development project (hereinafter referred to as costs of real estate development for short). The costs include compensation fees for taking-over of land and the dismantling of buildings, farm-land use tax and the evacuation involved, expenses for pre construction engineering, construction and insta11ation, infrastructura1 projects and supplementary pub1ic uti1ities and expenses indirectly re1ated to the development project.

The compensation fees for land taking-over, dismant1ing buildings and evacuation inc1ude fees for land taking-over , the occupation of farmland, the resett1ement of labour force, the net expenses incurred as compensat1on for dismantling and removing the attached items above and under ground, and fees for arranging houses for evacuation and resettlement.

Pre-construction engineer1ng expenses include expenses for planning and designing, feasibility studies, hydrological and geological research, surveys and mapping, and for bui1ding electricity, running water and gas supply projects for the construction site and ensuring smooth road transport.

The construction and installation expenses inc1ude expenses on construction and instal1ation paid to building teams which have contracted for the development project and also such expenses paid for se1f-managed development project.

Expenses for infrastructural Projects include expenses for road bu1lding, water. Electricity and gas supply projects, sewage and flood water discharge projects, te1ecommun1catlons, lighting installations, environmental protection and afforestati0n etc. in the development area.

Expenses for supplementary public utilities include expenses for building those supplementary public utilities is the development area which can not be paid transferred.

Expenses indirectly involved in the development project refer to expenses directly used for organizing and managing the development project, inc1uding wages. Workers?fringe  benefits. depreciation funds, repairing funds, office expenses, fees for running water and electricity, labour protection costs and expenses for houses used for evacuation and resettlement.

3. Expenses for land development, c0nstruction of new bu1ld1ngs and attached faclllt1es refer to the selling expense8, management fees and financial expenses related t0 the real estate development project.

The expend1ture f0r paying the interests in financial expenses can be deducted in full provided that it can be calculated and taken as items involved in the transfer of the real estate and is conf1rmed by documents of financial institutions. But the total amount of the interests must not exceed the total calculated according to commercial bank loans of the same type and for the same term. The other expenses for real estate deve1opment to be deducted must he kept within five percent of the total value calculated accord1ng to item l and item 2 of this Article.

As for those expenses whose interests cannot be ca1culated and taken as part of the expenses of the real estate transfer and cannot be proved by documents of f1nancial institutions, those expenses for real estate development must be kept within ten percent of the total value calculated according to item l and item 2 of this article. and are to be calculated and deducted thereof.

The exact ratios to be deducted 1n the above' stated calculations are to be decided by the Governments of the related Provinces, Autonomous Regions and Municipalities directly under the State Conncil.

4. The assessed values of old houses and bu1ld1ngs refer to the1r replacement costs assessed at the time of transfer by real estate appraisal organizations established with the approval of the Government. Depreciation funds are to be deducted from the replacement costs with the discount rates decided by the well preserved state of the houses and buildings that have already been used. The costs assessed have to be confirmed by the tax authorities.

5. Taxes related to the transfer of the real estate refer to Business Tax, City Maintenance and Construction Tax and Stamp Tax paid during the transfer. The Edueat1onal Fee paid on the transfer can also be taken as part of the taxes involved and deductible.

6. According to Item 5 of Article 6 of the Regulations, a taxpayer engaged in a real estate development project is allowed a 2O% deduction from the total cash value calculated according to item 1 and item 2 of this Article.

Article 8
The calculation of the Land Appreciation Tax on a tract of land is to be made by taking the most basic accounting items of the cost accounting for the real estate, or the object of accounting, as the accounting unit.

Article 9
Whereas a taxpayer who has received the right to use a tract of land, has developed the land plot after plot by stages and has transferred part of the real estate, the part of the value to be deducted from the tax payment can be calculated according to the proportion of the land-use right to be transferred to the total area of this tract of land, or according to the proportion of the area covered by buildings, or by other methods confirmed by the tax authorities.

Article 10
With regard to the four level progressive tax rates listed in Article 7 of the Regulations, the percentage "by which the appreciation amount exceeds the cash value of the deductible items" for each level includes the percentage itself.

In computing the Land Appreciation Tax on the land, the following simple method of calculation can be used for quick computation, i. e.  , the appreciation amount times the applicable rate and then minus the value of the deductible items multiplied by a coefficient .The concrete formulae are as follows:

l. Whereas the amount of the appreciation amount of the land does not exceed the value of the deductible items by 50%, the Land Appreciation Tax on the land = The appreciation amount x 30%;

2. Whereas the appreciation amount of the land exceeds the value of the deductible items by 50% but less than lOO%, the Land Appreciation Tax = The appreciation amount x 40% - The value of the deductible items x 5 %;

3. Whereas the appreciation amount of the land exceeds the value of the deductible items by 100% but less than 200%, the Land Appreciation Tax = The appreciation amount x50%-The value of the deductible items x l5 %;

4. Whereas the appreciation amount of the land exceeds the value of the deductible items by 200% or more, the Land Appreciation Tax = The appreciation amount x 60% -The value of the deductible items x 35%.

The 5%, l5% and 35% in the formulae are the deduction coefficient used for quick calculation.

Article 11
The "ordinary standard residences" mentioned in Item 1 of Article 8 of the Regulations refer to residential buildings constructed according to the standards of local ordinary residential buildings. The residential buildings of ordinary standards do not include high-class apartment houses, villas and holiday villas. The concrete yardsticks for distinguishing ordinary-standard residential buildings from other buildings are to be decided by the People's Governments of the related Provinces, Autonomous Regions and Municipalities directly under the State Council.

A residential building of ordinary standards constructed by a taxpayer for sale, provided that its appreciation amount does not exceed the total value of the deductible items listed in Items l, 2, 3, 5 and 6 of these Rules by 2O%, shall be exempted from the Land Appreciation Tax. In case that the appreciation amount of the ordinary-class residential building exceeds the total value of the deductible items by 20%, the taxpayer is required to pay a tax calculated according to the full appreciation amount in line with the Regulations.

"Real state taken over and repossessed according to laws due to the construction requirements of the State" as mentioned in Item 2 of Article 8 of the Regulations refers to a housing estate or its land-use right taken over and repossessed by the Government in line with the requirements of implementing municipal plans and national construction.

The real estate transferred by a taxpayer on his (her) own accord in compliance with the needs of implementing municipal plans and national constructions are exempted from the Land Appreciation Tax in line with the stipulations.

The organizations and individuals eligible for the stipulated tax exemptions are required to submit applications for tax exemptions to the tax authorities in the areas where their real estates are located. They shall be exempted from the Land Appreciation Tax after their applications are examined and approved.

Article 12
An individual who transfers the house he (she) owns and inhabits ow1ng to the transfer of his (her) work or the improvement of living conditions shall be exempted from the Land Appreciation Tax after his (her) tax exemption application is examined and approved he the tax authorities provided that he (she) has lived there for five years or more. If he (she) has lived there for over three years but less than five years, the Land Appreciat1on Tax shall be reduced by half. For an individual who has lived there for less than three years, the Land Appreciat1on Tax shall be calcu1ated and levied according to the stipulations.

Article 13
The "assessed value of the rea1 estate" as mentioned in Art1cle 9 of the Regulations refer to the value assessed by real estate appraisal organizations set up with the approval of the Government by referring to the same type of real estates in the same locality according to comprehensive standards, The assessed value must be confirmed by local tax offices.

Article 14
"Concealment or false reporting on the real estate transaction price" as mentioned in Item 1 of Article 9 of the Regu1atlons refers to the taxpayer’s conduct of not declaring or intentionally understating the price for transfer of the land use right and the buildings and attached facilities on the land.

"Providing false sums of deductible items" as mentioned in Item 2 of Article 9 of the Regulations refers to the taxpayer’s false declaration, without conforming to the real facts, of the value of the deductible items at the time of declaration for tax payment.

"The transfer price of rea1 estate is lower than the assessed value without proper justification" as mentioned in Item 3 of Article 9 of the Regulations refers to the condition that the real transaction price reported by the taxpayer for the transfer of the real estate is lower than the transaction price assessed by the real estate appra1sal organization with the taxpayer not being able to provide proofs or justifiab1e reasons.

In case of the concealment or falsification of the transaction price of a real estate, the price shall be assessed by the appraisal organization by referring to the market price for the transaction of the same type of real estates. The tax autho1ities then determine the income received for the transfer of the real estate on the basis of the assessment.

Whereas the value of the deductible items declared is false, the appraisal organizations shall assess their value by referring to the replacement costs of the house given a discount according to the degree of its well-preserved state, and also to the base price of the land at the time of obtaining the land-use right. The tax offices then determine the value of the deductible items according to the assessed value.

Whereas the reported transaction price for the transfer of a real estate is lower than the assessed value of the real estate and no justifiable reasons are provided, the tax offices shall determine the income from the real estate transfer on the basis of the assessed value.

Article 15
According to Article l0 of the Regulations, a taxpayer is required to pay the tax according to the following procedures:

1. Within seven days after the signing of the contract on the transfer of a real estate, the taxpayer is required to make a declaration for tax payment at the tax office in area where the real estate is located, and hand in documents showing the right of ownership of the house and building on the land and of the land-use right, contracts on the land transfer and the sale and purchase of the house, a report on the assessment of the real estate and other related information on the transfer of the real estate.

Whereas frequent transferring of real estates makes it difficult for the taxpayer to make a declaration after each transfer, he (she) is allowed to make periodic declarations with the time limit determined by the tax authorities.

2. The taxpayer is required to pay the Land Appreciation Tax according to the amount examined and decided by the tax authorities and within the period specified by it.

Article 16
Whereas the taxpayer has obtained an income from the transfer of a real estate before the completion of the construction project on it and the clearing of accounts, the Land Appreciation Tax can be levied in advance since the value of the tax cannot yet be calculated for involving the determination of the costs or because of other reasons. The settlement of accounts is to be made after the construction project and the clearing of accounts are completed. The overpayment of Land Appreciation Tax shall be refunded to the taxpayer while the underpayment shall be repaid by the taxpayer. The concrete methods shall be formulated by the local tax bureaus of the related Provinces, Autonomous Regions and Municipalities directly under the State Council according to local conditions.

Article 17
The "location of a real estate" as mentioned in Article 10 of the Regulations refers to the area where the real estate is 1ocated. Whereas the real estate transferred by the taxpayer is located in two or more areas, the taxpayer is required to make separate tax declaration in each of the areas.

Ar1icle 18
The related information which are required to be prov1ded by the 1and management and house property management departments to tax departments as stipula1ed in Article 11 of the Regulations refer to the information on the right of ownership of houses and buildings, land-use right, the va1ue of 1and transfer, the base price of the land, the market transaction price of the rea1 estate and the change of the right of ownership. The information shall be provided to the tax department in the area where the rea1 estate is located.

Article 19
The taxpayer who does not submit the documents of the right of ownersh1p of houses and buildings, the certificate of land-use right ,the contract on 1and transfer and the sale and purchase of the house property, the report on the evaluation of the rea1 estate and other in formation related to the transfer of the real estate, sha1l be dealt with 1n accordance with the stlpulatl0ns Of Art1cle 39 0f the Law of the People’s Republic of China Concerning the Tax Administration and Tax Co1lecti0n (hereinafter referred to as Administration Law).

The taxpayer wh0 does not declare the transaction price of his (her)real estate and the value Of the deduct1ble 1tems which result 1n tax underpayment or tax evasi0n, shall be dealt with according to provisions of Article 4O of the Administration Law.

Article 20
Renminbi is used as the basic unit 1n calculating the Land Appreciation Tax. When the income received from the transfer of a real estate is foreign currency, it shall be converted into Renminbi according to the exchange rate quoted by the Government on the day of payment or on the first day of the month of payment. The amount of Renminbi thus received shall be used as the basis for calculat1ng the Land Appreciation tax to be levied.

Article 21
"The measures of different districts for the col1ection of Land Appreciation Fees" as mentioned in Article l5 of the Regulations refer to the methods of collecting the Land Appreciation Fees and proceeds on the same type of land as laid down in the Regulations.

Article 22
The Ministry of Finance or the State Administration of Taxation is responsible for the interpretation of these Rules.

Article 23
The Rules are to come into force on the day of its promulgation.

Article 24
The Land Appreciation Tax between January 1,1994 and the day of the promulgation of the Rules shall be calculated and levied with reference to the stipulations of the Rules.