This year, the market for second-hand houses was covered by a pro bono policy of trading tax exemptions for taiwon municipal properties. According to feedback from a number of second-hand housing intermediaries in the provinces and cities, both market-driven and policy-encouraged, the market for second-hand homes in the provinces and cities this year has high levels of listing and willingness to sell, policy regulations for second-hand house taxes and the amount of taxes and fees related to the transaction price of the house, the cost of buying it, and the interest of both buyers and sellers。
Reporters from the shanxi evening newspaper visited the service window of the tax authorities and the second house intermediary market to learn that, at present, taxes and fees generated during second-hand house transactions are mainly tax dues, personal income tax and value added tax. The seller is subject to vat and personal income tax, and the buyer is liable to pay tax. What is the share of taxes and fees in second-hand house transactions? What are the exemptions? A detailed investigation was carried out by the shanxi evening reporter。
A the tax rate of the tax rate is 1 to 3 per cent for second-hand houses. In the interviews, a number of home buyers questioned why they tax more than others. Originally, the tax was paid by the buyer, in family units, and there was a preferential tax on the first set of housing and the second set of improved housing for families that met certain conditions。
Reporters of the shanxi evening news have learned that on 1 september 2021, the law of the people's republic of china on taxes (hereinafter referred to as the law on taxes) was officially implemented. The law on taxes upgrades the provisional regulations of the people's republic of china on taxes to law, maintains the 3 to 5 per cent rate without any increase, and adjusts the procedure for determining the applicable tax rates in accordance with the principle of taxation law。
In the same year, the applied tax rate for shanxi province was set at 3 per cent, and the preference was extended to the former tax preference. A reporter from the shanxi evening press called the state revenue service of shanxi province to learn that the tax on the amount of the tax on the purchase of a home fluctuated at 1 per cent, depending on how much it was paid. The first flat, with an area of less than 90 square metres, is paid at 1 per cent of the bargain; the first flat, with an area of more than 90 square metres, is paid at 1. 5 per cent of the bargain; the second flat, with an area of less than 90 square metres, is paid at 1 per cent of the bargain and the second flat, with an area of more than 90 square metres, is paid at 2 per cent of the bargain; and the third set and above, is paid at 3 per cent of the bargain。
In industry, it was reported that some second-hand home buyers were interested in entering into transactions that were far below the market price in order to reduce taxes and reduce the amount of tax payments through low-cost purchases, an act that was illegal. According to the law of the people's republic of china on taxes, the taxation of housing transactions is based on the actual transaction price of the house. If a contract for the purchase of a house is contracted to avoid tax at a low price, it is illegal to consider it as tax evasion or evasion, and the buyer is liable under the law. In addition, such operations create unnecessary risks for both parties to the transaction. In the case of a set of real deals of $1 million, for example, the buyers and sellers, for tax avoidance, enter into a contract for the purchase of the house at $500,000. If the buyer does not make an oral offer of $1 million, the seller is passive and will suffer economic losses. In addition, the contract's offer of sale will affect the price of the house when it is re-sold and the value of the property will be lowered。
“when second-hand houses are traded, trade through intermediaries is usually calculated on the basis of the transaction price, and sometimes the contract transaction price is clearly lower than the market price, at which point the tax is charged on the basis of the assessment of the tax system.” according to the industry。
B the vat-exemption from vat-plus is determined by vat. In 2016, china introduced a full-scale policy of moving from vat to vat (referred to as “breed-up”) by converting the vat from second-hand to vat. This reform is aimed at reducing the tax burden and simplifying tax collection in order to promote healthy development and trade dynamics in the real estate market. Many journalists in the shanxi evening newspaper learned that in the course of the current trade in second-hand houses in the province, the seller was required to pay vat of 5 per cent of the sale price or assessed value and other additional taxes。
In addition to vat, sellers are required to calculate city maintenance taxes, education fees plus local education supplements based on actual vat payments, which are based on vat collection rates of 7 per cent, 3 per cent and 2 per cent, respectively, or 12 per cent of vat. “these three are calculated on the basis of vat taxes, i. E. 5 per cent of the amount taxed multiplied by 12 per cent. At present, the surcharge has a preferential policy of 50 per cent, i. E. 6 per cent of the value added tax.” examples from industry sources show that second-hand houses with an exchange price of $1 million, if vat is calculated at the exchange price, are divided by 1. 05 at the transaction price and reduced to tax-free prices of approximately $9524,000. Vat is payable at 5 per cent of $95. 24 million, or approximately $476 million, and vat at 6 per cent of the additional tax, or 6 per cent of $476 million, or approximately $2856, totalling $50,456. “in combination, the two are equivalent to 5. 3 per cent of the tax amount, and in order to facilitate the calculation of second-hand house transactions, intermediaries usually inform the purchaser that the vat is 5. 3 per cent, which in fact includes a 0. 3 per cent surcharge.” according to the industry。
It is understood that vat will be calculated at the same time as the vat, and that vat will be calculated on the basis of the second-hand assessment price system of the tax department if the transaction price is far below the market price. In addition, under the current policy, second-hand houses are exempt from vat if they are “two full years”, i. E. Two full years of purchase. It is particularly important to emphasize that the “full two” period refers to two years from the last payment of the tax due. In general, owners pay taxes only when they process real estate certificates, so that the “full two” is similar to the time on real estate certificates, whereby the real estate intermediary introduces value added tax policy to the buyer, stating that the real estate certificate is two years old。
Industry has reminded that there are additional ways to calculate vat and surcharges, in addition to determining the amount to be paid at the agreed or assessed price. “if the seller can provide an invoice for the original purchase of the house, or the tax authorities can find the corresponding original price, the amount of the tax will be reduced to a certain amount by deducting the original price from the current or assessed price.” in the second-hand sale, the seller, according to the industry, could consult the tax authorities to determine the amount of the vat tax if it did not meet the “full two” exemption。
C in addition to vat, the seller is required to pay personal income tax. At the time of the second-hand house transaction, the personal income tax was levied in two ways, with a difference of 20 per cent or 1 per cent of the current price。
Last december, the new deal was about to be implemented: personal income tax on real estate transactions was no longer charged at 1 per cent, and based on a 20 per cent difference between the amount invoiced for the previous house purchase and the current contract price or the assessed price, the news went off in taiwon, causing social concern. It is understood that more personal income tax will be paid in this way, for example, for the sale of a $1 million house, at 1 per cent of which only 10,000 personal income tax is payable; if a 20 per cent tax is paid on the difference, the previous invoice for the house is 800,000 personal income tax for 40,000 personal income tax. This was followed by rumours from the relevant authorities that 20 per cent of the difference was not a new deal and that the 20 per cent difference would not be imposed as a tax. The reporter of the shanxi evening newspaper found that the law of the people's republic of china on personal income tax and its implementing regulations provide for the transfer of a person's home to be taxable in the amount of his or her transfer income less the original value of the property and the balance of his or her reasonable expenses, and the payment of personal income tax in accordance with the “proceeds of property transfer” project, with a 20 per cent tax rate applicable to the transfer of property。
However, in the course of implementation, a tax of 20 per cent of the proceeds of the transfer is levied if the seller is able to provide legally valid original purchase invoices and reasonable papers, or 1 per cent to 2 per cent of the full amount sold in the second-hand. A reporter from the shanxi evening newspaper called the staff of the department of taxation of shanxi who indicated that the difference of 20 per cent was collected and charged at 1 per cent of the total price, both of which were always collected. Some houses, however, do not provide complete valid documents, are difficult to locate at initial prices and are generally subject to a tax of 1 per cent of the total house price。
As with vat, personal income tax is exempt under certain conditions. According to a query by a journalist from the shanxi evening newspaper, according to article 2, paragraph 6, of document no. 20 of the circular of the state revenue service of the ministry of finance on certain policy aspects of personal income tax (1994), an individual is exempted from income tax on the basis of his or her own transfer for more than five years and his or her only household living income, i. E., a known “fifteen-plus” tax exemption。
D in a visit to shanxi’s evening press, buyers and sellers negotiated tax and fee limits, bearing in mind that the second-hand house market was clearly dominated by the seller, although the value-added tax and personal income tax should be borne by the seller, the cost of taxes and fees was more borne by the buyer in the actual trade of the second-hand house in the province。
“in order to save the cost of buying a house, the buyer will choose a reasonable way to reduce tax and expense, for example by choosing a lower 1 per cent personal income tax or by choosing, as far as possible, `two' houses to be exempted from vat.” in general, it is stated that when buyers purchase second-hand houses, except for the tax they are expected to pay, most people are able to accept personal income tax on behalf of the seller, and the amount of value added tax is usually the focus of negotiations between buyers and sellers. “on the one hand, vat is taxed at a higher rate than tax dues and individual taxes, with greater cost pressure on buyers, while on the other hand, vat conditions are easier to meet than a tax `to be one' and `to be two' conditions, and buyers prefer such second-hand houses.” industry sources have described the existence of many second-hand houses in the market, which are similar to the sub-districts and even the same building, and the fact that part of the “two” housing stock is unwelcome in the market because of the need to pay vat more, due to the time when real estate titles are processed. “the same household size, the same price, the absence of an extra tens of thousands of dollars in value added tax (vat) due to the `twenties' requirement, and the choice of the buyer, which requires negotiation between the buyer and the seller, the seller's own value added tax (vat) or a greater discount on the sale price.” according to the industry。
It is worth mentioning that taihara currently has a policy of limited-duration tax rebates if he is about to purchase a house, whether new or second-hand. Article 9 of the new article on the city of taiwon, issued this year, refers to the reimbursement of personal income tax for supporting the purchase of new housing by residents, and from 1 october 2022 to 31 december 2023, tax refunds are granted to taxpayers who sell their own housing and repurchase it within the city within one year of the sale of the current one. In addition to this, while there is no credit for the tax on second-hand houses, in the purchase of new commodity houses, the taiwon city “article 36” issued last year offers a preference: since 20 may 2022, for a period of two years, families without housing in the six urban areas have purchased the first set of new commercial housing units in the six urban areas. They may apply for tax subsidy, which is paid by the purchasers of the flat, if the building area is less than 90 square metres, with full financial subsidies; for the 90 to 143 square metres, with a financial subsidy of 80 per cent for the purchasers; and for the construction area above 143 square metres, with a financial subsidy of 50 per cent for the purchasers. Households who own a housing unit in the six districts of the city buy the second set of new commodity housing in the six districts of the city. The tax subsidy rate is applied by reference to the 20 per cent drop in the standard for the purchase of the first set of new commodity housing。
Industry suggests that the calculation of taxes in second-hand house transactions is complex and that various methods of calculation are available to both buyers and sellers, and that the actual amount paid is still subject to the tax authorities ' provision. In addition, buyers who plan to benefit from time-limited tax breaks must pay attention to policy time limits, and individual income tax refunds must account for the time of sale of their own housing, which can only be granted if they are repurchased within one year。
