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Huaxin Capital's Viewpoint: China's Real Estate Tax Legislation and Pilot Analysis

Analysis on the Legislation and Pilot of China's Real Estate Tax

1、 Events

On May 11, 2021, the heads of the Ministry of Finance, the Budget Working Committee of the Standing Committee of the National People's Congress, the Ministry of Housing and Urban Rural Development and the State Administration of Taxation hosted a symposium on the pilot work of real estate tax reform in Beijing, and listened to the opinions of some city government heads, experts and scholars on the pilot work of real estate tax reform.

2、 Analysis

In view of the confusion of all kinds of information on the Internet, it is necessary to clarify a concept first, that is, the regional pilot of property tax and the national legislative work are two things, and their promotion is parallel rather than mutually exclusive. This time, the NPC's Budget Committee, rather than the NPC's Legislative Affairs Committee, which is responsible for legislative work, participated in the meeting. The main content of the meeting was to listen to the opinions of some city people's government leaders and experts and scholars on the pilot work of real estate tax reform. Therefore, this symposium focuses more on regional real estate tax pilot work than national real estate tax legislation work. In the long run, the collection of China's real estate tax is inevitable, but it needs legislation first, and it is unlikely to be imposed in the short term. According to the Legislative Plan of the Standing Committee of the 13th National People's Congress on September 10, 2018, the Standing Committee of the 13th National People's Congress included real estate tax legislation in the five-year plan, which means that it is expected to complete the drafting of real estate tax legislation before 2023. Up to now, the real estate tax law has not been included in the 2021 legislative plan, indicating that the relevant research and early demonstration work has not been completed. At present, there are two major technical obstacles in levying real estate tax nationwide. First, China's real estate information is not sufficient and complete, and there are still real estate not registered; Second, China has not yet established an effective real estate value evaluation mechanism.



As early as 2011, the state launched the regional pilot work of real estate tax in Shanghai and Chongqing. The objects of Shanghai real estate tax collection include: 1) the second or more houses newly purchased in Shanghai by residents of Shanghai, and 2) the houses newly purchased in Shanghai by non residents. The tax is calculated on the basis of 70% of the transaction price of the housing market, with tax rates of 0.4% and 0.6%. In addition, 60 square meters of duty-free area per capita is deducted for Shanghai residents. The real estate tax objects in Chongqing include three categories: 1) single family commercial residential buildings owned by individuals, 2) high-end housing newly purchased by individuals, and 3) two or more ordinary housing newly purchased by individuals who have no household registration, enterprise, or job in Chongqing at the same time. The taxable value of the taxable housing is the real estate transaction price, and the taxable tax rate is 0.5% - 1.2%. At the same time, a certain amount of tax-free area is deducted from the housing. In view of the fact that from the perspective of establishing a stable and sustainable local tax source and ensuring that housing does not stir up, the effect of the real estate tax pilot in Shanghai and Chongqing is less than expected, and it is expected that the subsequent local pilot will be further deepened. On the one hand, the list of pilot cities is expected to continue to expand; On the other hand, the pilot policies in Shanghai and Chongqing may be adjusted.

At present, if the real estate tax reform pilot is extended to more regions, Shenzhen and Hainan are the most likely. The two places are respectively the first demonstration zone of socialist market economy with Chinese characteristics and high-level free trade port. The Opinions on Supporting Shenzhen to Build an Advanced Demonstration Zone of Socialism with Chinese Characteristics and the Overall Plan for the Construction of Hainan Free Trade Port both give the two cities greater autonomy in reform and support greater efforts to promote reform and innovation. Real estate tax can be tested through corresponding procedures without any legal obstacles. This is also consistent with the expert advice circulated on the Internet.

3、 Chronicle of China's Real Estate Tax Policy

The Interim Measures for Shanghai to Carry out the Pilot Project of Levying Real Estate Tax on Some Individual Houses and the Chongqing Municipal People's Government Decree No. 247 on 2011/28, Shanghai and Chongqing took the lead in levying real estate tax on residential houses


On March 16, 2011, the 12th Five Year Plan for National Economic and Social Development of the People's Republic of China was studied to promote the reform of real estate tax


The Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening the Reform made at the Third Plenary Session of the 18th Central Committee on November 12, 2013 clearly speeds up the legislation of real estate tax and timely promotes the reform


2014/3/5 "2014 Government Work Report", and do a good job in the legislation of real estate tax and environmental protection tax


On June 1, 2015, the Legislative Plan of the Standing Committee of the Twelfth National People's Congress (NPC) on real estate tax was officially included in the legislative plan of the Standing Committee of the Twelfth National People's Congress (NPC)


On October 18, 2017, the report of the 19th National Congress of the Communist Party of China, "Decisively win the building of a moderately prosperous society in all respects and win the great victory of socialism with Chinese characteristics in a new era", deepened the reform of the tax system and improved the local tax system. Further deploy for real estate tax reform


On March 5, 2018, the 2018 Government Work Report promoted the reform of the division of central and local financial powers and expenditure responsibilities, worked out the reform plan of income division, and improved the transfer payment system. To improve local tax systems, and prudently advance legislation on real estate tax.


September 10, 2018 Legislative Plan of the Standing Committee of the 13th National People's Congress The Standing Committee of the 13th National People's Congress included the real estate tax law in the first category of the legislative plan, that is, the conditions are relatively mature, and it is proposed to submit it for review within the term of office of the Standing Committee of the 13th National People's Congress


2019/3/5 Government Work Report steadily promoted real estate tax legislation


2020/5/18 Opinions of the CPC Central Committee and the State Council on Accelerating the Improvement of the Socialist Market Economic System in the New Era

On December 23, 2020, Liu Kun, Minister of Finance, published in the People's Daily "Establishing a Modern Fiscal and Tax System (Deeply Studying and Implementing the Spirit of the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China)" to actively and steadily promote real estate tax legislation and reform in accordance with the principle of "legislation first, full authorization, and step-by-step promotion"


2021/3/13 The Fourteenth Five Year Plan for National Economic and Social Development of the People's Republic of China and the Outline of Vision Goals for 2035 promote real estate tax legislation, improve local tax system, and gradually expand local tax administration


On May 6, 2021, Liu Kun, Minister of Finance, wrote an article in the Economic Daily titled "Establishing and Perfecting a Modern Fiscal and Tax System conducive to High Quality Development", improving the direct tax system, gradually increasing the proportion of direct tax, further improving the personal income tax system combining comprehensive and classified tax, and actively and steadily promoting the legislation and reform of real estate tax


4、 Our view

From the perspective of 3-5 years or even longer, it is inevitable that the National People's Congress will complete the real estate tax legislation and orderly promote the real estate tax nationwide, but it will not happen in the short term. In the next 1-2 years, we will expand the regional pilot work of real estate tax. For example, Shenzhen and other cities will join the ranks of Shanghai and Chongqing, and further implement the policy of no speculation in housing is a big probability event.