The policy of second-hand value added tax (vat) has been significantly adjusted to reduce the vat rate from 5. 3 per cent to 3 per cent for the sale of a house for less than two years and to achieve full national vat coverage for housing for two years. This policy change is directly related to the cost of second-hand house transactions and may have a ripple effect on the supply of and demand for buildings. Today, l has come to dismantle the details of the new regulation, the amount of taxes and fees that can be saved, and the real impact on buyers and sellers and the city。
I. The core elements of the new regulations: two major changes to simplify taxes and fees and directly reduce transaction costs
The vat adjustment was mainly based on two key changes in the length of housing holdings and the criteria for collection, which were simpler and more favourable to the population than the old policy:
Housing for less than two years: the old policy pays vat at 5 per cent of the sales price, and the new policy is reduced directly to 3 per cent of the sales price, equivalent to a six-percent discount on taxes and fees, saving 40 per cent of vat expenditure
Up to two years of housing: the old policy of selling “non-ordinary dwellings” (normal area > 144 m2 or unit/total price is too high) in the north, subject to 5 per cent tax (sale-purchase price) x 5 per cent, while other cities are exempt from taxes after two years; the new policy achieves “one-size-fits-all”, regardless of city size, house size and price, and vat is fully exempt for two years。
A practical example would be easier to understand: a housing unit of 150 m2 at a unit price of $30,000/m2 at a total sale price of $4. 5 million. If trading in the north is extensive under the old policy, the value added tax (4. 5 million - buy-in price) x 5 per cent is payable because it belongs to a non-ordinary dwelling, and if the purchase price is ignored, the value-added tax (vat) of 225,000 will be paid at the selling price only; under the new policy, the value-added tax (vat) of 225,000 will be directly waived once it has reached the end of the two-year period, and the savings will be particularly significant for second-hand house transactions。
Ii. Measurement of tax and fee savings: actual tax savings for different housing sources
In order to see more directly the impact of the new regulations on tax savings, we measure specific tax and tax differences by type and price of housing:
The effect of the new vat regulations on tax savings varies significantly from one source to another:
1. 1 million housing units under 2 years: 50,000 yuan in value added tax (vat) under the old policy and 30,000 yuan under the new policy, with direct savings of 20,000 yuan in taxes and fees
2. 3 million dwellings under 2 years of age: the value-added tax (vat) of the old policy was 150,000 yuan, the new policy was reduced to 90,000 yuan, and the savings tax amounted to 60,000 yuan
3. Over two years, 4. 5 million non-ordinary dwellings: the old policy was subject to a value added tax (vat) of 225,000 yuan, the new policy was fully exempt from vat and a sum of $225,000 was saved。
As can be seen, the higher the total price of the house, the more tax savings the new regulations will generate, especially in the case of large households and non-ordinary dwellings with high gross prices, the greater the impact of the savings on transactions after two years, which can reduce transaction costs of hundreds of thousands of dollars for both buyers and sellers。
Iii. The impact of the policy on the building market: the increase in the number of second-hand houses and the increase in the number of buyers and sellers
1. For sellers: reducing the cost of selling houses and accelerating the pace of market entry
Under the old policy, a number of sellers have opted to hold property temporarily, waiting for the right time, because they are less than two years overtaxed or because they have two years of irregular residence to pay taxes. The new regulations reduce the cost of taxes and fees for short-term sales and exempt large-household value-added tax (vat) payments, which may increase the willingness of already reluctant sellers to put the home's sources on the table, especially new owners of new buildings that have just been taken over, and may lead to an increase in the sales of second-hand houses。
2. For buyers: lower cost and wider choice
For second-hand home buyers, on the one hand, less than two years of tax on the source, and on the other hand, if the buyer bears the tax (as is common in the market), the cost of buying the house will be reduced directly; on the other hand, the large household housing stock, which has reached the end of two years, will no longer have a vat burden, the improved buyer will be able to enter the home at a lower cost and the options for buying will be expanded. It needs to be noted, however, that if there is an increase in the number of second-hand rooms, there will be a corresponding increase in bargaining space for buyers。
3. Market for new houses: indirect competition, or push for new houses
The new system of second-hand house trading will increase the value of second-hand houses, thus creating some competition for the new housing market. In particular, the advantages of new and second-hand houses at prices similar to those in the region, the ready-to-occupancy combination of second-hand houses, etc., will attract some buyers to the second-hand market. In this context, new home developers may maintain their attractiveness to home buyers through preferential concessions and product upgrading。
4. For the city as a whole: activation of second-hand house circulation and promotion of a virtuous cycle in the city
The increased mobility of second-hand homes allows more sellers to “sell new and old”, which in turn leads to the sale of new and improved houses, creating a virtuous circle of “second-hand houses”. At the same time, the simplification and reduction of taxes and fees has also reduced the links and costs of second-hand house transactions, increased the efficiency of market transactions and is expected to have a positive impact on stabilizing the city。
Iv. Details for buyers and sellers: avoiding pitfalls
1. Subject matter of tax liability: the new regulation only adjusts the vat rate and exemption, but the fee is borne by the buyer or seller and still requires explicit agreement in the contract for the purchase of the house to avoid subsequent disputes
2. Determination of the age of the house: the number of years of the house's possession is based on the registration time of the real estate title, not the time of delivery or residence, and prior to the transaction is required to verify and avoid errors in the calculation of taxes and fees due to an error of age
Non-residential property does not apply: this new regulation only covers residential properties, and the value-added tax policy for non-residential properties such as shops, writing buildings, apartments, etc. Has not been adjusted and is subject to the original regulations。
Do you think the new vat rules will make you more willing to buy used rooms? If it's a second-hand seller, would you choose to put up a card as soon as possible because of lower taxes? Welcome to the comment section to share your views。
