CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe LLP
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 140 square metres is eligible for a reduced rate of 1.5% and with a gross floor area of no more than 140 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.
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 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. An individual who transfers its residential housing after holding it for more than two years is exempt from paying VAT. 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.
283 CHAMBERS.COM
Powered by FlippingBook