Viewpoint... Tax-related issues in real estate judicial auctions (I) the taxes involved by buyers and sellers and the calculation method.

According to the law, policy and other provisions, the real estate auction by the buyer to bear the tax liability of the tax generally have deed tax, stamp duty;

Deed tax is a kind of property tax levied on the recipient of real estate and land whose ownership has been transferred.

Article 1 of the "the People's Republic of China Deed Tax Law" transfers the ownership of land and houses within the People's Republic of China, and the units and individuals who bear the deed tax are taxpayers of the deed tax and shall pay the deed tax in accordance with the provisions of this law.

The tax basis of deed tax is generally the auction transaction price, and the tax rate is 3%-5%. The applicable tax rate of deed tax shall be determined by the people's government of the province, autonomous region, and municipality directly under the Central Government within the range specified in the deed tax regulations in accordance with the actual conditions of the region.

The Decision on the Specific Applicable Tax Rates and Measures for Exemption or Reduction of Deed Tax in Shandong Province stipulates that the deed tax rate is 3%.

If the buyer is an individual, it shall be implemented in accordance with Annex I of the announcement of the State Administration of Taxation of the Ministry of Finance on the convergence of preferential policies after the implementation of the deed tax law (No. 29 of 2021), and in accordance with the notice of the Ministry of Finance, the State Administration of Taxation, the Ministry of Housing and Urban-Rural Development on adjusting the preferential policies for deed tax and business tax in real estate transactions (Caishui [2016] No. 23).

For individuals who purchase the only housing of a family (family members include buyers, spouses and minor children, the same below), with an area of 90 square meters or less, the deed tax shall be levied at a tax rate of 1%; for an area of 90 square meters or more, the deed tax shall be levied at a tax rate of 1.5. For the second set of improved housing with an area of 90 square meters or less, the deed tax shall be levied at a tax rate of 1%; for the area of 90 square meters or more, the deed tax shall be levied at a tax rate of 2%.

Article 1 of the the People's Republic of China Stamp Duty Law Units and individuals that set up taxable vouchers and conduct securities transactions within the territory of the People's Republic of China are taxpayers of stamp duty and shall pay stamp duty in accordance with the provisions of this Law.

Article 2 The term "taxable documents" as mentioned in this Law refers to the contracts, transfer of property rights and business books listed in the "Stamp Duty Item Tax Rate Table" attached to this Law.

The "Confirmation of Auction Transaction" and "Execution Ruling" are considered to be "property transfer documents", and the amount of stamp duty payable = auction transaction amount × tax rate of five ten thousanders.

If the buyer is an individual, according to Article 2 of the "Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Tax Policy of Real Estate Transactions", Caishui [2008] No. 137, the individual is temporarily exempted from stamp duty on the sale or purchase of housing.

Article 1 of the Provisional Regulations on the the People's Republic of China of Value-Added Tax (2017 Revision): Units and individuals that sell goods or processing, repair and repair services (hereinafter referred to as services), sales services, intangible assets, real estate and imported goods within the territory of the People's Republic of China are taxpayers of value-added tax and shall pay value-added tax in accordance with these regulations.

Value-added tax is a transfer tax levied on the basis of the sale of goods, the provision of taxable services, the value added of taxable acts and the amount of goods imported. From the practical point of view, the indirect calculation method is adopted, that is, taxpayers engaged in the sale of goods, the provision of taxable services and the occurrence of taxable acts shall calculate the tax according to the sales volume of goods, taxable services and taxable acts and the applicable tax rate, and then deduct the value-added tax paid in the previous link, and the balance shall be the value-added tax payable by the taxpayer in this link. According to the adjustment of the Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Value-Added Tax Rate (No. 32 [2018] of the Ministry of Finance) and the Announcement of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs on Relevant Policies for Deepening the Value-Added Tax Reform, the applicable tax rate for the sale of real estate and the transfer of land use rights is 9%.

(1) The auctioned person is a general taxpayer.

① When auctioning land use rights

According to the "Notice of the Ministry of Finance and the State Administration of Taxation on Further Clarifying the Policies on Labor Dispatch Services and Toll Road Toll Deduction in the Pilot Program of Business Tax Reform and Increase", the second paragraph of Article 3 of Caishui [2016] No. 47, taxpayers can choose to apply the simple tax calculation method for the transfer of land use rights acquired before April 30, 2016, the balance of the total price and extra-price expenses obtained minus the original price of the land use right shall be the sales amount, and the value-added tax shall be calculated and paid according to the collection rate of 5%.

Summarized by the table below:

② When the property is auctioned

According to the announcement of the State Administration of Taxation No. 14 of 2016 of the State Administration of Taxation on the issuance of the Interim Measures for the Administration of VAT Collection on the Transfer of Real Estate by Taxpayers, VAT shall be paid in accordance with the following methods:

(I) general taxpayers who transfer the real estate acquired before April 30, 2016 (excluding self-built) can choose to apply the simple tax calculation method to calculate the tax. The balance after deducting the original purchase price of the real estate or the price at the time of acquisition of the real estate is the sales amount, and the tax payable is calculated according to the levy rate of 5%. (II) general taxpayers who transfer their self-built real estate before April 30, 2016 can choose to apply the simple tax calculation method to calculate the tax, taking all the price and extra expenses obtained as the sales amount, and calculating the tax payable according to the collection rate of 5%. (III) general taxpayers transfer the real estate acquired (excluding self-built) before April 30, 2016, and choose to apply the general tax calculation method to calculate the tax payable, the total price and extra expenses obtained are calculated as the sales amount. Taxpayers shall, with the balance of the total price and extra-price expenses obtained after deducting the original purchase price of the real estate or the price at the time of acquisition of the real estate, pay the tax in advance to the competent local tax authority in the place where the real estate is located at a rate of 5%, and report to the competent national tax authority in the place where the institution is located. (IV) general taxpayers transfer their self-built real estate before April 30, 2016, and choose to apply the general tax calculation method to calculate tax, the total price and extra expenses obtained are used to calculate the tax payable for sales. Taxpayers shall, with the full price and extra-price expenses obtained, pay taxes in advance to the competent local tax authority where the real estate is located at a rate of 5%, and declare tax to the competent national tax authority where the institution is located. (V) general taxpayers transfer their real estate acquired after May 1, 2016 (excluding self-built), the general tax calculation method shall be applied, and the total price and extra expenses obtained shall be used to calculate the taxable amount of sales. Taxpayers shall, with the balance of the total price and extra-price expenses obtained after deducting the original purchase price of the real estate or the price at the time of acquisition of the real estate, pay the tax in advance to the competent local tax authority in the place where the real estate is located at a rate of 5%, and report to the competent national tax authority in the place where the institution is located. (VI) general taxpayers transfer their self-built real estate after May 1, 2016, the general tax calculation method shall be applied, and the total price and extra expenses obtained shall be used to calculate the tax payable for the sales. Taxpayers shall, with the full price and extra-price expenses obtained, pay taxes in advance to the competent local tax authority where the real estate is located at a rate of 5%, and declare tax to the competent national tax authority where the institution is located.

Summarized by the table below:

In addition to value-added tax, ordinary taxpayers are also required to calculate and pay additional taxes such as urban maintenance and construction tax (7% if the taxpayer is located in the urban area), education surcharge (3%), local education surcharge (2%), etc.

The Notice of the Ministry of Finance and the State Administration of Taxation on Comprehensively Launching the Pilot Program of Changing Business Tax to Value-Added Tax (No. 36 [2016] of the Ministry of Finance), Annex III Provisions on the Transitional Policy for the Pilot Program of Changing Business Tax to Value-Added Tax stipulates:

① Housing

Applicable to Beijing, Shanghai, Guangzhou and Shenzhen

Purchase of housing for less than 2 years: auction price x 5%

Purchase of non-ordinary housing for more than 2 years (including 2 years): (auction price-original purchase price of real estate or price at the time of acquisition of real estate) × 5%

Ordinary housing purchased for more than 2 years (including 2 years): VAT exemption

Applicable to cities other than Beijing, Shanghai, Guangzhou and Shenzhen

Purchase of housing for less than 2 years: auction price x 5%

Housing purchased for more than 2 years (including 2 years): VAT exemption

② Non-housing

(Auction price-the original purchase price of the real estate or the price at the time of acquisition of the real estate) x 5%

Auction and transfer of land use rights or real estate, in accordance with Article 2 of the Interim Regulations on the the People's Republic of China of Land Value-Added Tax, units and individuals that transfer state-owned land use rights, buildings on the ground and their attachments and obtain income are taxpayers of land value-added tax.

Land value-added tax is calculated and levied on the value-added amount obtained from the auction transfer of real estate and the applicable tax rate.

Appreciation = Total Auction Revenue-Deduction Item Amount. According to Article 6 of the Provisional Regulations, the deductions are:

The amount paid by the (I) to acquire the land use right;

(II) the cost and expense of developing the land;

(III) the cost and cost of new buildings and supporting facilities, or the assessed price of old houses and buildings;

(IV) taxes related to the transfer of real estate;

(V) other deductions prescribed by the Ministry of Finance.

The land value-added tax is subject to progressive rates of excess, as follows:

According to the Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Tax Policies for Real Estate Transactions, Caishui [2008] No. 137,Individual sales of housing temporarily exempt from land value-added tax.

According to the Notice of the State Administration of Taxation on Strengthening and Regulating the Collection of Individual Income Tax on the Auction Income of Individuals (No. 38 [2007] of the State Administration of Taxation), the (II) of the first paragraph of Article 1 of the first paragraph of the first paragraph of the first paragraph of the first paragraph of the first paragraph of the first paragraph of the first copy of the document works auctioned by individuals, the balance of the transfer income minus the original value of the property and reasonable expenses shall be the taxable income, personal income tax shall be paid at the rate of 20% in accordance with the item "income from transfer of property.

When calculating the taxable income from the auction of personal property, the taxpayer shall, on the basis of legal and valid documents, subtract the corresponding original value of the property, the taxes paid in the course of the auction of the property and the relevant reasonable expenses from the amount of the transferred income.

Take housing as an example, the items of personal income tax deduction:

(1) Original value of the property: for example, the purchase of commercial housing, the actual payment of the price of the house, the relevant taxes and fees paid.

(2) Reasonable expenses refer to the expenses of housing decoration, interest on housing loans, handling fees, notarization fees and other expenses actually paid by taxpayers in accordance with the regulations. Among them, commercial housing and other housing decoration expenses: taxpayers can provide unified tax invoices for the actual payment of decoration expenses, and the maximum deduction limit is 10% of the original value of the house.

(3) Taxes paid during the transfer of housing.

If the taxpayer cannot provide legal, complete and accurate proof of the original value of the property and cannot correctly calculate the original value of the property, the individual income tax shall be calculated and paid at the rate of 3% of the transfer income.

If it has been five years and belongs to the only living room of the family, it shall be exempted from personal income tax.