China to Legislate on Real Estate Tax

Business tax is scheduled to be completely withdrawn in 2015, according to China’s 12th Five-Year Plan.

The conversion of business tax into VAT (B2V) programme is a target for full implementation put forward by the latest government work report. Meanwhile, the government budget report further made clear that efforts are stepped up to expand the scope of B2V to construction, real estate, financial services and consumer services, and newly acquired real estate and the rent for leased real estate are included in the input VAT deductible, correspondingly reducing VAT rates.

Combing through the government work report, the budget report and the planning report, it shows that in addition to continuing to promote B2V and reforms in consumption tax, resource tax and individual income tax, tax legislation includes not only the real estate tax and the environmental tax but also vessel tonnage tax which made the first appearance.

The budget report proposed that efforts be made to adjust and improve the scope of consumption tax and tax rates in 2015, appropriately shifting the tax burden further to the consumer end. This will help adjust people’s consumption by means of taxation. Consumption tax can help regulate income distribution and guide rational consumption. Chines domestic consumption tax base is made up of the sales volume and value of 15 types of commodities including automotive, oil products, tobacco and alcohol.

The budget report made clear that apart from organising and implementing coal resource tax reform in 2015, relevant departments will also develop resource tax reform programmes of items other than crude oil, natural gas and coal.

The report also proposed to study a reform programme in 2015 that combines comprehensive and classified individual income tax.

In accordance with the schedule of implementing the statutory principle of taxation, together with a better legislation of real estate tax, environmental tax and vessel tonnage tax, the upgrade of current provisional regulations to law is actively promoted.

The vessel tonnage tax, proposed for the first time, is a tax on foreign ships, Chinese vessels leased by foreign merchants and Chinese and foreign ships used by Chinese-foreign joint ventures in Chinese ports.