CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe
2.10 Taxes Applicable to a Transaction In respect of the purchase and sale of real estate, taxes payable may differ depending on the dif - ferent transaction structures. Asset Deal In an asset deal, taxes payable include: • enterprise income tax/individual income tax; • VAT and surcharges; and • land appreciation tax, stamp duty and deed tax. Of these: • the seller is obliged to pay enterprise income tax/individual income tax, value added tax and surcharges, land appreciation tax, and stamp duty; and • the buyer is obliged to pay deed tax and stamp duty. Equity Deal In an equity deal (regardless of whether to pur - chase all or a portion of the equity/shares), taxes payable include: • enterprise income tax/individual income tax, which the seller is obliged to pay; and • stamp duty, which the seller and the buyer are both obliged to pay. In addition, see 7.2 Assigning Responsibility for the Design and Construction of a Project for the potential exposure to land appreciation tax in an equity deal. Tax Rates Enterprise income tax The rate ranges from 10% to 25%. The indi - vidual income tax rate is generally 20%, but an individual who transfers their sole residential
buyer may make further verification by access - ing, with the authorisation of the seller, the rel - evant files of the real estate at the competent planning and natural resources authority (the Planning and Natural Resources Commission or PNRC) or the competent local urban construc - tion archives. 2.9 Condemnation, Expropriation or Compulsory Purchase The state may, in the public interest: • expropriate real estate, including land col - lectively owned by farmers and buildings or other real estate owned by any entities or individuals, with appropriate compensation; or • temporarily requisition the real estate of any entities and individuals which will be returned to the said entities and individuals after such use. The power of expropriation and temporary requi - sition must be exercised with due authority and legitimate process. Compensation The compensation must be fair and reason - able in the case of expropriation and temporary requisition. Where the land to be expropriated is collectively owned by farmers, they shall be compensated according to the principle that their living standard is not negatively affected; while the land user, in respect of land under a land grant contract to be taken back by the government for public interest, shall be compen - sated, considering the actual elapsed term of the land use and the status and condition of the developments made on the land. In the case of requisition, compensation shall be made for any damage to or destruction of the requisitioned real estate.
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