CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe
housing after holding it for more than five years is exempt from individual income tax payment. VAT The rate ranges from 5% to 9%. Surcharges imposed on the VAT payable include tax for maintenance and construction of cities at an applicable rate ranging from 1% to 7%; edu - cation surtax at an applicable rate of 3%; and local education surtax, the rate of which varies in different localities. See 7.1 Common Structures Used to Price Construction Projects for more detailed analysis. Land appreciation tax The rate for this is progressive, ranging from 30% to 60%, but an individual who transfers their residential housing is exempt from paying this tax. Deed tax This generally ranges from 3% to 5%, but an individual who purchases a sole residence for their family (including their spouse and underage children) with a gross floor area of more than 90 square metres is eligible for a reduced rate of 1.5% and with a gross floor area of no more than 90 square metres, of 1%. Stamp duty The rate is generally 0.05% for the seller and the buyer. Currently, an individual who purchases or transfers residential housing is exempt from pay - ing this tax. 2.11 Legal Restrictions on Foreign Investors Foreign entities or individuals cannot acquire real estate in the PRC for non-personal use unless a foreign-invested enterprise is established or has been established in the PRC to own and operate
the real property. The following restrictions also apply to foreign investors: • a foreign individual is only allowed to pur - chase one housing unit (in practice, one title certificate represents one unit of housing) for their own use, subject to the requirement of residing or studying in China for more than one year; and • a branch or representative office of an off - shore entity in China is allowed to purchase non-residential real estate for its office use in the city where such branch or representative office is registered. If commercial real estate is acquired by an onshore entity (including a foreign-invested enterprise), generally the onshore entity may seek financing from banks within the PRC, subject to certain restrictions required by the China Bank - ing Regulatory Commission. If the onshore entity intends to arrange loans from offshore bank(s) or offshore entities, including shareholder(s), to acquire a commercial real estate, it must meet the requirements and restraints in relation to for - eign debt under the PRC laws. Currently, no real estate companies are allowed to arrange loans from offshore, except for foreign-invested real estate companies incorporated prior to 1 June 2007. Offshore Acquisition and Onshore Fixed- Asset Loans Where a foreign investor acquires commercial real estate through an equity deal (by acquiring equity interest in the onshore company holding the real estate), the most common financing 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
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