Chinese real estate companies on tax planning

Summary: real estate business is one of the industry tax burden is the heaviest, the first analysis of the characteristics of the business of real estate and taxes involved and then from the land value-added tax, corporate income tax and sales tax of these three taxes, analyzes the class corporate tax planning methods.

Keywords: real estate businesses, tax planning, land value increment tax

Tax as a cost of doing business, with business interests are closely related. Reasonable and effective control of corporate tax costs and help the sustainable Development of real estate industry is a typical capital-intensive industry, and with the national macro-control step pressed, the real estate industry profits are extremely squeezed by the "lucrative industry" to "flat profit industry" change, coupled with the large number of real estate companies now, more competitive. real estate companies have the means to achieve through the tax planning minimize corporate tax burden, thereby reducing the financial pressure to reduce costs and increase economic efficiency, build competitive advantage, lay the foundation for the company's Development.

First, the operating characteristics of the real estate business and tax situation
(A management features
Real estate companies, real estate Development is their business goods, the property is obviously different with the other commodities, it has its own unique operating characteristics:
1. Development and management has planned and complexity of corporate business everything from land acquisition, demolition survey, design, construction, sales to service the whole process from land acquisition to construction and housing, infrastructure and other facilities, merchandise sales should be strictly controlled within the scope of the national plan.

2. Development and construction of a long cycle, amount of investment. Product development from planning and design, through feasibility studies, land acquisition, resettlement compensation, seven pass a level, construction and installation, supporting projects, green environmental engineering, and several stages of development, ranging from a years, as many years to complete.

3. Operating risks. Product development units of high value, long construction period, debt management a high degree of uncertainty, once the decision is wrong, poor sales, will result in a large number of product development backlog, the business cash flow, which causes trouble.

(Two real estate tax burden of companies
From the industry perspective, the current Chinese real estate industry, the average tax burden is higher than other domestic industries, according to the report the relevant statistics, China's tax revenue in 2009 59 $ 51.5 billion, an increase over the previous year 5 291 million, the same year in real estate industry, land value increment tax, land tax, deed tax, property tax, urban land use tax, business tax and real estate transfer tax and other seven housing tax increase amounts to $ 1 85.185 billion yuan, accounting for all of China in 2009 the amount of 5291 income tax revenue billion, 35% a year among the nation's tax revenue growth of more than 1 / 3 comes from the real estate industry, an increase in the line in the first place, from the tax rate, the real estate industry's overall high taxes now, the Chinese room real estate development companies in terms of sales revenue to pay 5% sales tax, by income pay 25% corporate income tax, land value-added tax rate is 30% to 60%. In short, the real estate tax burden is too heavy, through tax planning, to achieve tax reduction, the company's only choice.

Second, the real estate company involved in tax
(A preparatory phase of the tax
Real estate company in the preparation stage need to pay less taxes, mainly farmland use tax and deed in real estate development, if occupied land, we must take in land management approval within 30 days from the date of arable land per square meter tax from 1 yuan to 15 per month to pay off the amount of cultivated land occupation tax to purchase land according to the 3% to 5% of the rate of pay the deed tax.

(Two real estate taxes involved in the development stage
Turnover in the development stage of the tax rate by 3% of construction sales tax, signed a building construction contract, the contract amount by ten thousandths of stamp duty to pay taxes, but also on land owned by urban land use tax payment.

(Three stages involved in real estate sales tax
1. Sales tax. Shall only apply to the sale of real estate "sale of real estate," the provisions of items to 5% rate of housing price to pay sales tax; for real estate lease terms, leasing real estate sales tax applies to the "service" lines, the uniform implementation of the 5 % of the proportional tax rate.

2. Land value increment tax. Super-value-added tax rate of a progressive land tax, value-added and more and more symptoms, less a small levy value-added, non-value added does not levy a minimum tax rate of 30% of the maximum rate of 60%.

3. Stamp duty. Real estate sales phase of stamp duty, is in real estate transactions, real estate transactions for the amount for "transfer of property rights according to the book" items, in accordance with 0.05% tax rate.

4. Corporate income tax. The real estate business, if the transfer or lease of real estate had a net income, earnings should be included in the enterprise of its total profits subject to corporate income tax corporate income tax rate of 25% ratio.

5. Property taxes. The construction of commercial real estate development companies, before the sale, does not levy property taxes, but before the sale of real estate development business use or rental of housing loan should be required to levy property taxes. Property tax proportional tax rate, according to real estate residual tax levied, the tax rate is 1.2%; based real estate rental income taxable at the rate of 12%.

Third, the real estate company's tax planning strategy
As can be seen from the above description, the land value-added tax, corporate income tax, sales tax is the main tax burden of real estate companies, and therefore the focus of corporate taxes to carry out tax planning.

(A land value increment tax planning
Land value-added approach is the characteristics of ultra-progressive rates, which determine the reasonable and legitimate in the sales process to reduce the value-added tax planning has become critical.

1 for interest on borrowings of planning, rational way to determine the interest deduction, according to <<LAT Provisional Regulations>> the requirement, if we can transfer the project divided by interest expense, and can provide proof of financial institutions, interest can be deducted , but not more than the same period according to the provisions of commercial banks lending interest rates. If you can not distinguish between the real estate interest on loans and other production and management of loan interest and can not provide proof of financial institutions, according to land costs and development costs of the sum of 5% of the interest deduction limit, so the process of the project started , the company can reasonably estimate and compare the "real interest loan program" and "land costs and development costs of the sum of 5% of the" what, thus, the beginning of the project to build the most favorable choice for business interest deduction method .

(2) take full account of the land tax threshold for tax incentives, according to the provisions of the taxpayer to build common standards for residential sales, value added does not exceed 20% of the deduction, exemption from land tax, value added more than 20% deduction , according to the ultra-progressive rates to pay land tax. As the land value-added tax with higher tax rates, so the project can be properly estimated sales value-added ratio, value added increased to fully consider the benefits and give up "20%" increase in the threshold of the tax burden on both the relationship between to choose a reasonable price.

Links to free download http://www.hi138.com 3. The overall transfer pricing decomposition, split income. The cost of real estate companies in the same conditions, the reduction of income can reduce the value added in the ultra-progressive rates, you can also choose a lower tax rate, from the perspective of tax saving that is particularly important, therefore, the sale of housing, the housing can be considered a variety of devices are sold with the house, signed two contracts with customers that sign a real estate sale, and entered into a subsidiary office equipment purchase and sales contracts, the revenues decomposition, not only saved the company the land value-added tax, stamp duty and also save addition, the customer saves a deed, to achieve win-win situation.

(B corporate income tax planning
1. Delay in tax planning. Companies can postpone the completion time by way of deferred tax time, to ease the financial pressure on businesses to consider the time value of money, which in fact reached the effect of tax planning, according to Guo Shui Fa [2009] 31 <<real estate development business corporate income tax treatment of>> requirements, real estate development companies operating as one of the following three conditions are deemed to have completed: (a completion of product development has been reported that materials management department of real estate (2 product development has been put into use (3 product development has made the initial proof of ownership. have been completed in accordance with the development of products can not be the way to pay for tax gross corporate income tax, but must be pre-or actual sales revenue net of costs to calculate the enterprise income tax, such as the above three conditions are not met a person, according to tax gross way to advance corporate income tax because of Guo Shui Fa [2009] No. 31 in the lower gross margin tax provisions, net of business tax and surcharges end basically no income after tax can be paid in advance, so enterprises should pay attention to completion of the file under the conditions, try to delay the completion time, to achieve the legitimate purpose of tax-deferred.

2. Take advantage of tax deductions under the tax law for tax law can be tax deductible property insurance, unemployment insurance, industrial injury insurance, maternity insurance, medical insurance, pension insurance, housing fund and other expenses, should be purchased in full, this would both increase reduce the cost of corporate income tax deduction, and compliance with laws and regulations; more important is to seek the welfare of staff, will help to retain talent and increase the competitiveness of enterprises.

(C) the business tax planning
1. A reasonable split the business, stripping other charges, according to the relevant provisions of tax law business tax, sales tax, taxable income for the taxpayers providing taxable services, transferring intangible assets or selling real estate to the other charged the full price and other charges. Room real estate companies in the process of selling real estate, often at the same time to collect natural gas connection fees, cable installation fee and other costs, so real estate companies in the process of selling real estate in the collection of these funds should be into real estate sales, calculated to pay sales tax, which increased the tax burden of real estate companies, if able to collect money from the real estate business separate income tax, you can not originally belong to the real estate business revenue collecting fees from separate sales revenue, and ultimately to reduce tax purposes.

2. Will house decor, decoration and equipment installation costs separate contract.'s Commercial real estate business sales and fine decorated rooms have two kinds of rough housing in housing sales in the process, the taxpayer will be broken down into the behavior of sales housing sales housing and renovation housing two acts, respectively, signed two contracts, the purchase price to the other two charged in the tax, respectively, by "selling real estate" to pay 5% sales tax and the "construction" pay 3% of the sales tax, save 2% sales tax .

References:
[1] Hong Wang, Chen. Tax planning [M]. Beijing: Tsinghua University Press, 2006.

[2] Zhuo, Wang Hongchun. The real estate business tax planning and feasibility study [J]. Applied Energy Technology, 2007, (11).

[3] Ma Shengjun. Land value-added real estate business planning analysis [J]. Financial Management, 2008, (5).

[4] Liu months new. Of the real estate tax planning [J]. The financial sector: Academic Edition, 2009, (12).

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