China’s Current Tax System – Farm Land Occupation Tax

(1) Taxpayers

Taxpayers are enterprises, units, individual household businesses and other individuals (except enterprises with foreign investment, foreign enterprises and foreigners) who occupy farmland for building construction or for other non-farm purposes.

(2) Scope and tax payable per unit

This tax is imposed on all State owned and collectively owned crop-planting land, and also on newly developed wasteland, fallow land, land for rotation of crops, land for rotation of grass and crops.

Different ranges of tax per unit are specified for different regions in consideration of the average size of farmland occupied per person and the local economic situation. The annual amount of tax payable per square meter is: taking county as the administrative region for calculation (hereinafter the same), 2-10 yuan for county with one mu or less of farmland per person; 1. 6-8 yuan for county with 1-2 mu farmland per person; 1.3-6.5 yuan for county with 2-3 mu farmland per person; and 1-5 yuan for county with more than 3 mu farmland per person. The amount of tax payable per unit may be raised for Special Economic Zones, Economic and Technological Development Areas and regions of developed economy and tiny average size of farmland per person.

In order to avoid the big gap between neighboring regions, the Ministry of Finance has assessed the average tax per unit for provinces, autonomous regions and municipalities at provincial level, which ranges from 2.5 to 9 yuan.

(3) Computation

This tax is based on the area of farmland actually occupied by taxpayers and by applying the specific applicable tax per unit, and paid in lump-sum. The formula for computing the tax payable is:

Tax payable – Area of farmland actually occupied by taxpayer ¡Ñ Applicable amount of tax per square meter

(4) Major exemptions and reductions

a. Exemptions may be given on land for military facilities; land for railroads and airports; land for schools and hospitals; land for farm irrigation facilities; no larger land for construction of new houses than the old house in countryside, where the land has been turned into farm planting; land for settling immigrants due to reservoir construction, victims of calamity or refugees.

b. Tax reductions or exemptions may be given on land for construction of new houses for countryside residents; revolutionary martyr’s family, handicapped revolutionary military servants, widows and orphans in countryside and peasants living a difficult life in old revolutionary base areas, minority nationality areas and far remote mountain regions who build new houses within the stipulated standards of land use and who have real difficulty in paying the tax; welfare factories set up by Civil Affairs Department for settling the employment of the handicapped; and land for construction of motor roads.