For the past 6 months the Chinese government has been pondering the introduction of a property tax – an annual tax imposed on owners of property – to cool down the perceived the real estate “bubble”. Four trial cities have now been indicated – Beijing, Chongqing, Shanghai and Shenzhen. The tax will apply to residential properties. It is not clear yet whether the tax will be applied on all homes or merely properties that are not the owner’s principal residence. The policy reasons behind the tax would suggest that the tax should only be applied to investment properties.
For the past 12 months, the question of whether to introduce a property tax has been at the forefront of political discussion in China. China does already tax property (most usually when such property is realized) but the proposed “property tax” would be an annual tax on property.
The policy reasons behind the proposed the tax are to deter speculators from driving the price of property up and to provide a steady stream of revenue for local government. However, the prevailing perception is that given that the major property owners have significant political influence it is doubtful that the proposed tax will be ever made law. Taxes are never popular but this is one that has been the subject of more criticism than usual. It will be interesting to see what happens.
In a notice that was published on the State Administration of Taxation (SAT) website last week, the SAT and Ministry of Commerce (MOFCOM) have continued to relieve taxes in certain circumstances with respect to universities. Caishui 155 provides as follows:
- That apartments owned by universities for student accomodation will not be subject to property taxes;
- That lease agreements signed by universities and their students in respect of student accomodation will not be subject to stamp duty;
- Fees charged to students for student accomodation will not be subject to sales tax;
- No sales tax will be imposed upon university dining facilities.
Hwuason is supportive of this continuing concession for the education sector.