Agencies
China on Wednesday announced a raft of tax policies aimed at boosting the country’s ailing real estate market, state media said, including cuts to property deed taxes and VAT. Deed tax incentives for housing transactions would be “enhanced to actively support basic and improved housing needs”, state broadcaster CCTV said, citing various government agencies, including the Ministry of Finance.
The property sector has long accounted for around a quarter of gross domestic product and experienced dazzling growth for two decades, but a years-long housing slump has battered growth as authorities eye a target of around five percent for 2024. China is trying to shore up the sector, and said in October that it would boost credit available for unfinished housing projects to more than $500 billion.
Beijing has in recent months also announced a slew of measures aimed at boosting economic activity, including rate cuts and the easing of some home purchasing restrictions. CCTV said Wednesday’s announcement from China’s Ministry of Finance, state tax authority and the Ministry of Housing and Urban-Rural Development was aimed at clarifying “various tax incentives to support the real estate market”.
“The announcement specifies that the deed tax incentives for housing transactions will be enhanced to actively support basic and improved housing needs,” CCTV reported, adding “the minimum prepayment rate of land value-added tax will be reduced to ease financial difficulties for real estate companies”.
The measures, which come into force on December 1, include an increase in the minimum area for homes eligible for a one percent low tax rate from 90 square meters (970 square feet) to 140 square meters, which used to be taxed up to three percent. The deed tax policy for second homes in the four cities of Beijing, Shanghai, Guangzhou and Shenzhen will also be brought in line with the rest of the country, CCTV said. That means householders buying their only home or second home will pay a unified one percent deed tax rate, provided the area does not exceed 140 square meters.
Other policy reforms include the uniform reduction of the minimum pre-collection rate of land VAT by 0.5 percentage points across regions. And individuals who sell homes that have been owned for two years or more will be exempt from VAT in cities like Beijing, Shanghai, Guangzhou and Shenzhen.
Ahead of Wednesday’s policy announcement, China last week unveiled an ambitious plan to relieve public debt, aiming to turn local governments away from belt-tightening practices that have exacerbated the domestic downturn. Policymakers approved a proposal to swap six trillion yuan ($840 billion) of hidden debt belonging to local governments for official loans with more favorable terms.
