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Apr 03, 2017

Living There


INDIVIDUAL TAXATION

China luxury residential homes

Residents are taxed on their worldwide income. Married couples are assessed and taxed separately since joint taxation is not allowed.

The residence of individuals is determined principally on physical presence or domicile in China or, in certain circumstances, the right to reside in China. An individual is considered ‘domiciled’ in China if he habitually resides in China as a result of household registration, family, or economic interests.

Chinese nationals residing overseas may be considered as residents of China for tax purposes if they are considered domiciled in China.

INCOME TAX

There are several categories of income in China: (1) wages and salaries, (2) production or business operations, (3) contracted or leased operations of enterprises or institutions, (4) remuneration for personal service, (5) author’s remuneration, (6) royalties, (7) interests, dividends, and bonuses, (8) lease of property, (9) transfer of property, (10) contingent income, and (11) other income.

Some categories of income are taxed at progressive rates while other kinds of income are taxed at flat rates. Progressive income tax rates from 5% to 45% are levied on wages and salaries. Flat tax rate of 20% is levied on investment income such as dividends, royalties, income from leasing property, income from transfer of property, income from manuscripts, and contingency income. Progressive income tax rates up to 40% are levied on income from personal services.

MONTHLY INCOME TAX ON EMPLOYMENT INCOME

TAX RACE, RMB (US$) TAX RATE
Up to 1,500 (US$242) 5%
1,500 – 4,5000 (US$726) 10%
4,500 – 9,000 (US$1,452) 20%
9,000 – 35,000 (US$5,645) 25%
35,000 – 55,000 (US$8,871) 30%
55,000 – 80,000 (US$12,903) 35%
Over 80,000 (US$12,903) 45%
Source: Global Property Guide

INCOME TAX ON BUSINESS INCOME

TAX RACE, RMB (US$) TAX RATE
Up to 15,000 (US$2,419) 5%
15,000 – 30,000 (US$4,839) 10%
30,000 – 60,000 (US$9,677) 20%
60,000 – 100,000 (US$16,129) 30%
Over 100,000 (US$16,129)   35%
Source: Global Property Guide

INCOME TAX ON LABOUR SERVICES

TAX RACE, RMB (US$) TAX RATE
Up to 20,000 (US$3,226) 20%
20,000 – 50,000 (US$8,065) 30%
Over 50,000 (US$8,065) 40%
Source: Global Property Guide

Residents are entitled to deductions and allowances, depending on the category of income.

RENTAL INCOME
Only Chinese citizens are allowed to own real property in China.

Rental Income Tax

The Ministry of Finance reduced the taxes on rental income from 01 January 2001. Rental income earned by residents is currently taxed at 10%. Residents are entitled to a standard deduction of 20% of the gross income to cover income-generating expenses. Effectively, the rental income tax is 8% of the gross income (10% tax on 80% of the gross rent).

CAPITAL GAINS

INCOME TAX

Net gains from transfer of property are taxed at a flat rate of 20%. The taxable income is the gross selling price less acquisition costs and related reasonable expenses. The maximum deduction for real estate development expenses is around 10% of the property cost.

Capital gains from the sale of a real property that was self-occupied for at least five years are exempt from taxation.


PROPERTY TAX


House Property Tax

Real property tax is levied on all real property (but not land) owned by residents at a rate of 1.2% of its assessed value.

If the property is rented out, the applicable tax rate is 12% and it is levied on the annual rental income. The rate may be reduced to 4% for leasing residential property. However, the practice may vary across China since applicable tax rates are determined by the local authorities.

Residents are entitled to a deduction of 10% to 30% of the property’s assessed or annual rental value. The exact allowable deduction depends on the local authorities. Consequently, the tax base is 70% to 90% of either the property’s assessed value or annual rental value.

This tax is payable to the local governments, and is paid annually, with payments by installments.

Land Use Tax

Land use tax is levied on all individuals who use land in cities and county towns.

For properties located in urban areas, the tax rates vary from CNY1.50 (US$0.25) to CNY30 (US$4.97) per square meter (sq. m.) in large cities, from CNY1.20 (US$0.20) to CNY24 (US$3.98) per sq. m. in medium-sized cities, and from CNY0.90 (US$0.15) to CNY18 (US$2.98) in small cities.

For properties located in less developed inland areas and autonomous regions, lower rates apply. As a general rule, local governments are allowed to adjust tax rates on the condition that the reduced rate is not lower than 30% of the lowest rate for county towns and mining areas.

CORPORATE TAXATION

INCOME TAX

Income earned by companies is generally taxed at a flat rate of 25%. Taxable income generally includes profits, capital gains, and passive income such as interest, royalties, and rents. Income-generating expenses are deductible when calculating taxable income.

Net gains from transfer of property are taxed at a flat rate of 20%. The taxable income is the gross selling price less acquisition costs and related reasonable expenses. The maximum deduction for real estate development expenses is around 10% of the property cost.

Business Tax

Business tax is a turnover tax imposed on activities involving immovable properties and intangible goods and services. Business tax rates vary from 3% to 20%, depending on the nature of goods and services.

Sales of immovable properties are subject to business tax, which is imposed at 5% of the net gains.

Land Appreciation Tax

Land appreciation tax is a transaction tax on the transfer of the rights to use state-owned land in China. It is based on the net gain and imposed at progressive rates. The taxable gain is computed by deducting the following from the proceeds of the transfer: the cost of acquiring the property, development expenses, repair and maintenance expenses, relevant tax payments, and other amounts considered by tax authorities to be deductible.

Tax rates start at 30% and can go up to 60% depending on the tax base, which is the valuation of the net gains in connection with the total deductions.

LAND APPRECIATION TAX

TAXABLE BASE (Net Gains)
TAX RATE
Up to 50% of all deductions
30%
50% - 100% of all deductions
40%
100% - 200% of all deductions
50%
Over 200% of all deductions
60%






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