TAX NEWS - JUNE 2010

China Tax: China settles base line to levy pre-requisitioned land value-added tax

The State Administration of Taxation (SAT) made an announcement Thursday, demanding local tax authorities to raise the pre-requisitioned rate of land value-added tax and establish a system to link this rate raise with the housing price growth.

According to State Administration of Taxation, except for indemnificatory houses, rate in China's eastern provinces should not be less than two percent, while in Central and northeastern regions the number should be larger than 1.5 percent, and in west China no less than one percent.

State Administration of Taxation (SAT) required local tax authorities to adjust the rate in accordance with the real estate market and make it closer to the actual tax burden.

Previously, in order to attract real estate investors, local tax authorities implemented lower-than-pre-requisitioned land value-added tax which could not walk along housing price growth. Moreover, State Administration of Taxation has required local authorities to account and audit on local land value-added taxes and report results back by July.

Guangxi, Henan, and Qingdao had already increased their rates.

Land value-added tax is to levy taxes on the increased value of real estate projects. Land and buildings are objections of the tax, while the added value is the base of tax.