asia房地產

The mainland of the People’s Republic of China (China) issued a draft rule on inheritance tax in 2002 to solicit public opinion. However, as of today, no statute has been passed to provide guidance on inheritance tax.

1.2 Gift tax

No gift tax is levied in China.(中國無贈與稅)

1.3 Real estate transfer tax

From the estate and succession perspective, no real estate transfer tax is levied in China.(中國無房地產轉移稅) However, transfer of real estate or land-use rights in China may be subject to individual income tax (IIT), business tax, deed tax, stamp duty and land-appreciation tax.(但是中國有收入稅,契稅,印花稅與土地增值稅)

1.3.1 Individual income tax

In accordance with the provisions of China Tax Circular — Caishui (2009) No. 78 (Circular 78) — if a transfer of real estate or land-use rights is made without consideration, the property received would be considered “other income” to the recipient and subject to IIT at a flat tax rate of 20%. However, according to Circular 78 and Tax Circular Guoshuifa (2009) No. 121, the transfer by virtue of inheritance or gift under the following circumstances will be exempted from the IIT:

• Gratuitous transfer of land-use rights or real estate to lineal relatives (i.e., spouse, children, parents, grandparents, grandchildren and siblings).
• Gratuitous transfer of land-use rights or real estate to dependents.
• Gratuitous transfer of land-use rights or real estate to statutory heirs and legatees upon the death of the decedent.
• Gratuitous transfer of land-use rights or real estate to a spouse by virtue of divorce.

In order to claim IIT exemption on these transfers, transferees should fulfill the registration requirement with the local tax authority and obtain written approval.

In the case that the transfer is subject to IIT, the taxable income would be determined based on the value of the real estate or land-use rights stated in the succession or gift contract, subtracting the relevant taxes and expenses paid by the transferee. However, if the value stated in the contract is obviously lower than the fair market value (FMV) or there is no price available in the contract, the relevant tax authority may deem the taxable income according to the market appraisal price or through other reasonable methods.

If the transferee resells the land-use rights or real estate later, such transfer will be subject to IIT. The tax base will be the proceeds from the sale of land-use rights or real estate, less the original purchase cost of the decedent or the donor, and the expenses and taxes paid by the heir or donee in the transfer.

IIT is filed on a monthly basis, and if IIT liability is triggered, the taxpayer is required to file the IIT monthly return with the local tax authority. The IIT return is generally due on the 15th of the following month.

1.3.2 Business tax

According to the implementation rule of business tax regulations, if real estate or land-use rights are transferred to an entity or an individual as a result of a gift, the transfer would be considered a taxable transaction, and the transferor would be subject to the business tax and the relevant surtaxes at the time of transfer.

However, as provided in Circular Caishui [2009] No. 111, gift transfers are temporarily exempted from business tax and the relevant surtaxes under the following circumstances:

• Gratuitous transfer of land-use rights or real estate to lineal relatives.
• Gratuitous transfer of land-use rights or real estate to dependents.
• Gratuitous transfer of land-use rights or real estate to statutory heirs and legatees upon the death of the decedent.
• Transfer of land-use rights or real estate as a gift to a spouse by virtue of divorce.

Transferors are required to comply with relevant registration formalities of the local tax authority so as to claim the business-tax exemption on the gift of the real estate or land-use rights.

In the event that the tax liabilities occur, the business tax would be assessed by the local tax bureau. The tax rate applicable to the transfer of real estate and land-use rights is 5%.

1.3.3 Deed tax

China levies deed tax on nonstatutory successors who acquire real estate or land-use rights by virtue of inheritance or gift. However, gratuitous transfer to statutory successors is exempt from deed tax. Statutory successors include spouse, children, parents, siblings, paternal grandparents and maternal grandparents.

Deed tax rates range from 3% to 5% depending on the location of the cities in different provinces. The tax base for deed tax calculation is deemed by the tax authority with reference to the market value of the real estate or the land-use rights.

The taxpayers should file the deed tax return with the local tax authority within 10 days after the succession or gift agreement is concluded.

1.3.4 Stamp duty

The stamp duty is imposed when a contract of property transfer is concluded. Both parties who sign the contract are liable for the stamp duty.

The tax base for the stamp duty is calculated based on the value of the property specified in the contract.

The tax rate applicable to the contract concluded for transferring property rights is 0.05%.

1.3.5 Land appreciation tax

According to the China Temporary Regulation of Land Appreciation Tax (LAT), sale or compensated transfer of real estate or land-use rights is subject to LAT. A transferor who benefits from the transfer is liable for LAT. However, transfer of real estate or land-use rights without consideration, such as inheritance or gift, will not realize a charge.

1.4 Endowment tax

No endowment taxes are levied in China.

1.5 Transfer duty

No transfer duty is levied in China.

1.6 Net wealth tax

No net wealth tax is levied in China.