Circular of State Administration of Taxation on Issues concerning the Imposition of Individual Income on the Proceeds from Housing Transfer by Individuals

Circular of State Administration of Taxation on Issues concerning the Imposition of Individual Income on the Proceeds from Housing Transfer by Individuals

Guo Shui Fa [2006] No. 108

July 18, 2006

The local tax authorities of all provinces, autonomous regions, municipalities directly under the central government and cities under separate state planning, the finance offices (bureaus) of Hebei, Heilongjiang, Jiangsu, Zhejiang, Shandong, Anhui, Fujian, Jiangxi, Henan, Hunan, Guangdong, Guangxi, Chongqing, Guizhou, Qinghai, Ningxia, Xinjiang, Gansu provinces (autonomous regions, municipalities directly under the Central Government), the finance bureaus of Qingdao, Ningbo and Xiamen Municipalities,

Pursuant to Law of the People's Republic of China on Individual Income Tax and its detailed implementing rules, for the individual transfer of houses, the balance after the transfer income deducting the original value of such houses and other reasonable expenses shall be taxable incomes, and would be subject to IIT according to the items of "income from the transfer of property/assets". Later, according to the requirements of the economic development in China, Circular of the Ministry of Finance, the State Administration of Taxation and the Ministry of Construction on Issues Concerning the Imposition of Individual Income Tax on Income from Private House Sales (Cai Shui Zi [1999] No. 278) has regulated the details regarding the calculation of IIT taxable incomes from the transfer of houses by individuals and relevant IIT issues for exchanging houses ownerships. Recently, during the collecting IIT for the transfer of houses by individuals, some areas have also raised some issues which need to be further clarified. In order to perfect the IIT system, to intensify the tax imposition and administration, and according to the relevant spirits of the Law of the People's Republic of China on Individual Income Tax and the Law of the People's Republic of China on the Administration of Tax Levying, now we have the following clarifications on relevant issues:

I. When collecting IIT on income from the transfer of houses, the transfer income shall be the actual transaction price. If the house transaction price declared by taxpayers is obviously lower than the market price and without reasonable explanations, then according to relevant laws the tax imposition authorities shall have right to decide the transfer income based on the relevant market information, but will make sure that the taxable income for all kinds of taxes shall be the same.

II.
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