Taxes Payable by Individuals for the Purchase of Housing in China
Taxes Payable by Individuals for the Purchase of Housing in China
- Taxes payable for transfer of the purchased houses by individuals
(1) Value added tax
(a) Individuals who sells houses bought for less than 2 years shall pay VAT in full at the rate of 5%.
(b) Individuals who sells houses bought for more than 2 years (including 2 years) :
(ⅰ) Areas outside Beijing, Shanghai, Guangzhou and Shenzhen are exempt from VAT;
(ⅱ) In Beijing, Shanghai, Guangzhou and Shenzhen, individuals shall pay VAT at the rate of 5% based on the difference between the sales income and the purchase price of the house. VAT shall be exempt when individuals sale ordinary houses which purchased for more than 2 years (including 2 years).
Tax deduction or exemption:
(a) Individuals selle self-built houses of own use shall be exempt from VAT;
(b) VAT shall be exempted if the free transfer of real estate by individual involves a division of family property.
(2) VAT Surcharges
(a) Urban construction tax = VAT payable * urban construction tax rate (as following):
| Location of taxpayers | Urban construction tax rate |
| City | 7% |
| County, town | 5% |
| Not in city, county or town | 1% |
(b) Education surcharge = VAT payable * education surcharge rate
(c) Local education surcharge = VAT payable * local education surcharge rate
Tax deduction or exemption:
(a) From 1 January 2019, VAT surcharges for VAT small-scale taxpayers shall be halved (including individuals);
(b) VAT surcharges shall be exempt if individuals are exempt from VAT.
(3) Individual income tax
Property transfer income from the sale of second-hand houses by individuals shall be calculated after deduction of original value of the house, taxes paid in ownership transfer and reasonable expenses from the transfer income. The reasonable expenses refer to the house furnishing expenses, handling fees, notary fees and other expenses actually paid by taxpayers according to the regulations.
Tax deduction or exemption:
(a) No individual income tax shall be levied on both parties for the gratuitous grant of house property right under the following circumstances:
(ⅰ) The house owner gives the house property right to spouse, parents, children, grandparents, maternal grandparents, grandchildren, maternal grandchildren, brothers and sisters without compensation;
(ⅱ) The house owner bestows the property right free of charge to the person who has the obligation to support the owner directly;
(ⅲ) The house owner dies, the legal heir, testamentary successor or legatee who obtain the property right are exempt from IIT.
(b) To divide the house property right through divorce is the disposal of the mutual property of spouses, individuals shall be exempt from IIT for property transfer for the reason of divorce.
(c) Income derived from the only family house transfer by individuals for own use for more than five years shall be exempted from IIT temporarily.
(4) Stamp duty
Stamp duty shall be calculated at 0.5‰ of the contract amount, individuals shall be exempt from stamp duty for sale or purchase houses.
- Taxes payable for house purchase by individuals
(1) Deed tax
Deed tax is the transaction price without VAT multiplied by deed tax rate. The applicable tax rate is 3%-5%, which shall be determined by governments of provinces, autonomous regions and municipalities within the prescribed range in accordance with local actual conditions and shall be reported to China’s Finance Ministry and State Administration of Taxation.
Tax deduction or exemption:
(a) If individuals purchase the only family house of 90 square meters or less, the deed tax will be levied at 1%; if the only family house is above 90 square meters, the deed tax will be levied at 1.5%.
(b) If individuals purchase the second family house of 90 square meters or less, the deed tax will be levied at 1%; if the house is above 90 square meters, the deed tax will be levied at 2%( the preferential policy shall not be implemented in Beijing, Shanghai, Guangzhou and Shenzhen temporarily)
(c) The legal successors shall inherit the ownership of lands or houses without paying deed tax.
(d) The ownership change of land or house between husband and wife in duration of marriage shall be exempt from deed tax.
(2) Stamp duty
Stamp duty shall be calculated at 0.5‰ of the contract amount, individuals shall be exempt from stamp duty for sale or purchase houses.