Legal issues about returning houses after paying the business tax

Posted by on February 27, 2012 under Transactional Taxes | Be the First to Comment

The inquiries posted by Liaoning local taxation bureau in terms of returning houses after paying business in real estate enterprises and the reply of  State Administration of Taxation have caused wide discussion.

Local taxation bureau deemed returning houses issues caused by the developer or sale’s problem such as misleading, false advertising, and poor quality are not subject to tax return policy.  SAT replies: two types of returning houses: 1. Signed real estate business contract without property registration; 2. Signed business contract with property registration. For the first type of returning houses, taxation bureau should arrange business tax return. If having obtained the property registration certificate, returning houses is repurchasing. Therefore, in the next sales, business tax can be balanced and imposed.

According to the Law of PRC’s Business Tax, the obligations of business tax start when the taxpayer provide taxable services, transfer intangible assets or sell real estate with business income. Therefore, having business income is the prerequisite of business tax obligations. Decrease in business income will cause decrease in the taxpayers’ tax duty. Tax refund after returning houses is not legal grounded.

In article 3 item 1 of the Ministry of Finance and State Administration of Taxation on Several Business Tax Policy Issues (Caishui [2003] No.16), it is clarified that units and individuals who provide taxable services, intangible assets transfer, and return of real estate sales are allowed to tax return or deduct respective amount in their future business income. Based on this notice, taxation authority should return the business income tax after the returning.

From the perspectives of civil law, returning houses is not a new trading act. In Article 93 of Contract Law, the trading parties can terminate the contract based on mutual agreement. In the termination, the performed session can be compensated with restoration, remedial measures by law. Sellers and buyers of real estate are not banned from further negotiations to renew the original ownership status. Restoration is retractable to the initial contract, and the original legal action is no longer valid. This is significantly with ownership status in repurchasing contract. The later contract does not affect legal actions of any kind.

From the perspectives of property law, contract becomes effective when the parties create, alter, alienate and terminate real estate property contract, except for contracts under other regulations or agreements. Lack of property registration does not affect the validity of the contract. Change of ownership status caused by returning houses, the two parties should manage to restore the property rights to original status. Therefore, new changes in registration can only change the property status but also invalid the original change of registration. In conclusion, ownership registration after returning houses is not deemed as repurchase.

Policy analysis on business tax exemption for offshore service outsourcing income

Posted by on October 12, 2011 under Tax Incentives | Be the First to Comment

According to Caishui Notice No 64, the business tax on offshore service outsourcing income could be exempted. On 23rd Dec, 2010, Beijing issued 2010 NO 6 Notice regarding “Follow-up measures on Beijing local tax bureaus cancelling approval items on business tax exemption on technology transaction (Trial)”, and made explicit regulations on application related items.
According to Notice NO 6, outsourcing enterprises in Beijing who apply business exemption should firstly apply outsourcing contracts confirmation to Beijing Commerce Commission and provide offshore service outsourcing contracts (Chinese version and foreign version) with signature or seal. The specific procedures of contracts confirmation please refer to “offshore service outsourcing contracts confirmation guidance” on Beijing Commerce Commission website.
After contracts confirmation, enterprises should provide application reports, contracts and confirmation form of Beijing Commerce Commission, to tax authorities for record.
After record in tax authorities, enterprises should fill and submit application form and technology income verification form during tax declaration.
If the amount of outsourcing income exceeds the amount in verification form, enterprise should provide written situation statement and supplementary contracts to tax authorities for confirmation, business tax could only be exempted after tax authorities’ confirmation.
Meanwhile, tax authorities should check and verify enterprises’ application, make trace analysis and statistics, report to Beijing business tax authorities monthly and proactively communicate with supervisors once problems.

Circular of Ministry of Finance, SAT on Business Tax Preference Policies concerning Agro-Related Loan of Branch of Agro-Related Finance Business Division of Agriculture Bank of China in Trial Municipality Area

Posted by on April 20, 2011 under Latest Regulations, Transactional Taxes | Be the First to Comment

Caishui No. 116, 2010

To promote management system reform of Agro-Related Finance Business Division of Agriculture Bank of China, support economic development of municipality area, as approved by the State Council, business tax policies of reform trial spots of Agro-Related Finance Business Division of Agriculture Bank of China are hereby notified as follows:

I. From October 1st,2010 to September 30, 2011, for branches of municipality area (or municipal business division) under subsidiary bank of 8 Provinces (autonomous regions, municipalities directly under the central government) as Jilin, Fujian, Shandong, Hubei, Guangxi, Chongqing, Sichuan and Gansu which are included in the reform trial spots of Agro-Related Finance Business Division of Agriculture Bank of China, Interests incomes derived from providing  farmer households loan,  loan for rural enterprises and various of rural organizations (see the attached for specific business list) shall be levied on for business tax at the reduced rate of 3%.

Farmer households loan in This Notice refers to loan provided to farmer households by financial institutions, but does not include the small amount farmer households loan which shall be exempted from business tax according to Circular of Ministry of Finance, SAT on Tax Policies concerning Rural Finance, Caishui No. 4, 2010.

II. Farmer households in This Notice refers to dwelled households living in scope of villages and towns (excluding suburban towns) or scope of administrative villages under suburban towns (hereafter jointly as “villages”) for a long term (one year or above one year, follows as the same), including households, workers in the State-owned farms and rural individual business households who live in the villages for a long term without a local registered permanent residence. Farmer households shall be as “households” and can devote to agriculture production business or non-agriculture business. Collective households of State offices, social groups, schools, State-owned enterprises and public institutions located in villages, or households with a rural permanent residence but all members of which have left for other living, no matter keep the contracted farmland or not, do not belong to farmer households.     

Loan for rural enterprises and various of rural organizations in This Notice refers to loan provided to rural registered enterprises and various of rural organizations by financial institutions. 

III. Branches of municipality area which are included in the reform trial spots of Agro-Related Finance Business Division of Agriculture Bank of China should follow Article 9 of Interim Regulation of the People’s Republic of China on Business Tax and other relative regulations, and separately determine and calculate the loan interests incomes enjoying the business tax reduction policies; if not, can not enjoy the business tax policies stipulated in Article 1 of This Notice.

Ministry of Finance, SAT

December 31,2010

Circular of Ministry of Finance, SAT on Business Tax Preference Policies concerning Agro-Related Loan of Branch of Agro-Related Finance Business Division of Agriculture Bank of China in Trial Municipality Area

Posted by on February 23, 2011 under Latest Regulations | Be the First to Comment

Caishui No. 116, 2010

To promote management system reform of Agro-Related Finance Business Division of Agriculture Bank of China, support economic development of municipality area, as approved by the State Council, business tax policies of reform trial spots of Agro-Related Finance Business Division of Agriculture Bank of China are hereby notified as follows:

I. From October 1st,2010 to September 30, 2011, for branches of municipality area (or municipal business division) under subsidiary bank of 8 Provinces (autonomous regions, municipalities directly under the central government) as Jilin, Fujian, Shandong, Hubei, Guangxi, Chongqing, Sichuan and Gansu which are included in the reform trial spots of Agro-Related Finance Business Division of Agriculture Bank of China, Interests incomes derived from providing  farmer households loan,  loan for rural enterprises and various of rural organizations (see the attached for specific business list) shall be levied on for business tax at the reduced rate of 3%.

Farmer households loan in This Notice refers to loan provided to farmer households by financial institutions, but does not include the small amount farmer households loan which shall be exempted from business tax according to Circular of Ministry of Finance, SAT on Tax Policies concerning Rural Finance, Caishui No. 4, 2010.

II. Farmer households in This Notice refers to dwelled households living in scope of villages and towns (excluding suburban towns) or scope of administrative villages under suburban towns (hereafter jointly as “villages”) for a long term (one year or above one year, follows as the same), including households, workers in the State-owned farms and rural individual business households who live in the villages for a long term without a local registered permanent residence. Farmer households shall be as “households” and can devote to agriculture production business or non-agriculture business. Collective households of State offices, social groups, schools, State-owned enterprises and public institutions located in villages, or households with a rural permanent residence but all members of which have left for other living, no matter keep the contracted farmland or not, do not belong to farmer households.     

Loan for rural enterprises and various of rural organizations in This Notice refers to loan provided to rural registered enterprises and various of rural organizations by financial institutions. 

III. Branches of municipality area which are included in the reform trial spots of Agro-Related Finance Business Division of Agriculture Bank of China should follow Article 9 of Interim Regulation of the People’s Republic of China on Business Tax and other relative regulations, and separately determine and calculate the loan interests incomes enjoying the business tax reduction policies; if not, can not enjoy the business tax policies stipulated in Article 1 of This Notice.

Ministry of Finance, SAT

December 31,2010

Circular of Ministry of Finance, SAT on Adjusting Business Tax Policies upon Transfer of Individual Living Housing

Posted by on under Latest Regulations | Be the First to Comment

Caishui No. 12, 2011

To promote the healthy development of real estate market, as approved by the State Council, business tax policies upon transfer of individual living housing are hereby notified as follows:

I. For individuals selling out living houses in 5 years from purchase, business tax shall be fully levied, for individuals selling out non-ordinary living houses after 5 years from purchase, business tax shall be levied based on the balance of sale incomes minus purchase price, and for individuals selling out ordinary living houses after 5 years from purchase, business tax shall not be levied.

II. Standard of ordinary living house and non-ordinary living house, tax exemption procedures, purchase time, invoice providing, balance taxation deduction receipt, housing obtained by non-purchase form and other related tax management rules shall refer to relevant regulations of Circular of the General Office of the State Council on Forwarding the Opinion of Such Departments as the Ministry of Construction on Doing a Good Job of Stabilizing House Prices, Guobanfa No.26, 2005, Notice of SAT, the Ministry of Finance and the Ministry of Construction on Intensifying the Administration of Real Estate Taxes, Guoshuifa No. 89, 2005 and Notice of SAT on Some Specific Issues concerning Real Estate Taxation Policies, Caishui No. 172, 2005.

III. This Notice shall be put into effect on the next day of the issuance, and Circular of Ministry of Finance, SAT on Adjusting Business Tax Policies upon Transfer of Individual Living Housing, Caishui No. 157, 2009 shall be put to an end at the same time.