The Ministry of Finance ("MOF") and the State Taxation Administration ("STA") have recently issued the Law of the People's Republic of China on Land Appreciation Tax (Draft for Comment) (the "Draft for Comment") for public consultation by August 15, 2019.
The Draft for Comment deals with the scope of taxation, tax rates and tax base, deductions, tax preference, time when tax obligation occurs, filing period, modes of taxation administration, etc. Among others, granting or transferring the right to use collective land, buildings thereon and their fixtures (collectively as "collective real estate") is taxable under the Draft for Comment. Meanwhile, a proposal is made to cancel the current land appreciation income adjustment fund levied on collective real estate. In addition, the Draft for Comment expressly states that land appreciation tax will still be levied at the four-bracket progressive tax rates and based on the increment derived from the real estate transfer. Moreover, the Draft for Comment proposes adjustments in four aspects to particular tax preference policies. For example, building affordable houses with an appreciation rate of lower than 20% will be exempt from tax.