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LAND APPRECIATION TAX |
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[1] The scope of the PRC Land Appreciation
Tax includes the gains arising from the transfer of land use
right and the buildings that are constructed on the land. Land
appreciation tax is levied from 30% to 60% on gain on disposal
of landed properties with reference to the percentage of
appreciated value over the deductible amount. For completed
properties, the deductible amount is the sum of purchased
price and taxes paid. In the absence of tax invoice for the
purchased properties, the land appreciation tax is imposed at
0.5% to 1% of the contract amount. |
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| I |
Not
exceeding 50% |
30% |
| II |
Exceeding
50% but not exceeding 100% |
40% |
| III |
Exceeding
100% but not exceeding 200% |
50% |
| IV |
Exceeding
200% |
60% | |
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[2] Illustration: Assuming that the
selling price of an office premises is say RMB11,000,000 and
the cost of purchase including taxes is RMB4,000,000. The
appreciation is RMB7,000,000. Calculate the amount of the land
appreciation tax. |
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| I |
4000000
x 50% = 2000000; less than 2m |
2 million |
30% |
0.6 million |
| II |
4000000
x 100% = 4000000; 2m to 4m |
2 million |
40% |
0.8 million |
| III |
4000000
x 200% = 8000000; 4m to 8m |
3 million |
50% |
1.5 million |
| IV |
Over
8m |
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60% |
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7 million |
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2.9 million | |
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The
tax rates range from 30% to 60%, but the highest appreciated
portion only reaches 50% (300 in this example). |
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[3]
Simple calculation method: The land appreciation tax rules
provide for a simple calculation method. There is an
applicable quick calculation coefficient associated with each
tax rate. The quick calculation formula is as follows: tax
amount = appreciation value x applicable tax rate – amount of
deduction x quick calculation coefficient. One can arrive at
the same tax amount using the formula: 7,000,000 x 50% –
4,000,000 x 15% = 2,900,000; where 15% is the quick
calculation coefficient corresponding to the 50% tax
rate.
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| I |
30% |
0 |
| II |
40% |
5% |
| III |
50% |
15% |
| IV |
60% |
35% | |
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