"Replacing business tax with value-added tax" creates a new style of the real estate market: while reducing taxes, it is also the optimization of the model

Release time: 2018-08-06 Source: Wenda Architecture Author: admin    

    There is only a little more than a month left before May 1, when the construction industry, real estate industry, financial industry and life service industry will fully implement the pilot of replacing business tax with VAT。By then, the business tax that has been implemented for more than 20 years will all be replaced with value-added tax。After the replacement of business tax with VAT, what tax burden changes will be brought to housing enterprises, homebuyers and the real estate market has become the most concerned topic in the industry。

    On March 24, the Ministry of Finance and the State Administration of Taxation jointly issued the "Notice on Comprehensively Promoting the Pilot Project of Replacing Business Tax with Value-added Tax" (hereinafter referred to as the "Notice"), which explained the long-awaited specific taxation rules in the industry。Among them, the general taxpayer in the real estate development enterprise sells the real estate projects developed by it (except for the old real estate projects which choose the simple tax calculation method), and the balance of the total price and out-of-price expenses obtained, after deducting the land price paid to the government department at the time of the transfer of land is the sales。

    This means that the land price, which accounts for about 20% to 40% of the total sales and even higher in first-tier cities, will not be included in the scope of taxation。"The land payment is deducted in the sales, which greatly reduces the tax burden of housing enterprises.。Especially for real estate enterprises that buy land at high prices in first-tier cities, tax cuts will help relieve the pressure and encourage them to increase real estate supply。"Finance and taxation experts, Shandong University of Finance and Economics economic research center director Pan Mingxing told China real estate newspaper reporters。

    Minister of Finance Lou Jiwei said that after the real estate is included in the deduction chain, the real estate rented by enterprises and the real estate formed by investment can be deducted, but the previous real estate can not be offset, and the part of new investment can be offset。I am afraid that there may be a change in tax burden at the beginning stage, to encourage enterprises to invest, and even when the amount of investment is large, it may not be taxed for one or two years, and all are deducted。"This will encourage enterprises to invest in, buy and hold commercial real estate, and for real estate enterprises engaged in commercial real estate, it is also easy for them to pass the tax burden to the next family, so the real estate business reform will increase the benefit of commercial real estate.。Gao Liqun, head of indirect tax at Deloitte East China, said。

    "It is recommended that enterprises that want to buy real estate wait until the implementation of the business tax reform on May 1 this year to buy a house, and may not pay taxes for several years.。"Pan Mingxing said。

    As for second-hand housing transactions, it is estimated that after the replacement of business tax with VAT, the tax burden will only decrease and not increase, and buyers need not panic to enter the market。It should be noted that although replacing business tax with value-added tax helps to destock the property market, it is not a life-saving remedy, especially the permanent inventory caused by ineffective market supply。

    "Ineffective supply will still be the more difficult part of destocking, which exists in both held and sold properties。For commercial real estate developers, it is still recommended to recognize and understand the special attributes of business, regardless of the pressure of market competition, to create the product that is needed is the first evaluation factor, rather than simply and violently pursuing the speed of development。After all, there are only consumers and you in front of the market。RET Rui Yi De director Soshan said in an interview with China real estate newspaper。

    Impact on housing enterprises

    The cost of land is no longer taxed and the higher the price, the better the value

    At present, the business tax rate of real estate enterprises is 5%, and the calculation of business tax and additional is about 5%~6%;The construction business tax is 3%, and after replacing business tax with VAT, the VAT for both industries is set at 11%。In theory, "if you can't get the input deduction, it means that you have to pay a full 11% tax, then the tax burden will naturally rise sharply.。However, from the logic that enterprises in all upstream industries involved in real estate make full use of value-added tax invoices, the replacement of business tax with value-added tax should be a tax reduction on the whole。Guangdong province, a city of Internal revenue service relevant person said。


    According to the Notice, VAT tax payable = output tax of the current period - input tax of the current period, when the output tax of the current period is less than the insufficient deduction of the input tax of the current period, the insufficient part can be carried forward to the next period to continue to be deducted。When a general taxpayer in a real estate development enterprise sells the real estate projects developed by him (except old real estate projects), the sales amount shall be the balance of the total price obtained and the out-of-price expenses, after deducting the land price paid to the government department at the time of transferring the land。The real estate development enterprises shall sell the developed real estate projects in the way of advance collection, and pay VAT in advance at the rate of 3% when receiving the advance collection。

    For old project sales,The "Notice" gives a transitional method: general taxpayers in real estate development enterprises,Sales of old real estate projects developed by oneself (refers to real estate projects whose contract start date is before April 30, 2016 as indicated in the Construction Permit of Construction Projects),The simple method of tax calculation is based on the 5% levy rate。This level of tax burden is comparable to the previous 5% sales tax burden。

    "Housing enterprises adopt the pre-sale system, business tax will be paid in the period when the pre-sale income is confirmed, occupying working capital, and business tax constitutes the cash outflow of housing enterprises that cannot be ignored.。After the VAT is changed, the general real estate project construction, materials, etc. are purchased first, and the input tax is greater than the output tax in most of the time, so there is no tax to pay at the beginning of the development for a long time, reducing the occupation of enterprise working capital。DTZ Greater China head of research Nie Anda analysis said。

    Ping An Securities analyst Wang Lin once estimated that the proportion of land costs in the total sales of housing enterprises is about 20% to 40%, with the high cost of land in the core cities of the first and second tier, the proportion of land costs in the total cost has a further rising trend。If the land cost can be deducted, it will significantly reduce the developer's tax cost (from 5.5% down to 3.78%)。

    The "Notice" makes it clear that the land cost is directly deducted in terms of output tax, which means that the higher the proportion of land and construction costs, the less tax burden。Wang Yigao, a member of the Hunan Provincial Political Consultative Committee and deputy director of Hunan Economic Geography Research, believes that the replacement of business tax with VAT is good for housing enterprises that have paid the land payment and other related funds and do not owe the government money, and may be a fatal blow to enterprises that owe a lot of taxes。

    Pan Mingxing believes that the tax burden of two types of enterprises will rise, "First, before the implementation of the business tax reform, enterprises buy a large number of (such as the purchase of real estate, etc.);Second, when some enterprises purchase materials, the source is not very clear, and the other party can not provide invoices, enterprises will not be able to offset the tax。Because value-added tax = output tax - input tax, in the case of a certain scale of sales, the amount of tax paid by enterprises depends on the amount of purchases。The tax burden of buying more goes down, and the tax burden of buying less goes up。As the construction industry and the financial industry will implement the replacement of business tax with VAT together with the real estate industry, the ability of upstream builders to pass on input tax and whether the output tax of real estate developers can be transferred to consumers have become key factors affecting profits and taxes payable。

    From the perspective of tax burden, if the output tax is not transferred, the corporate tax burden is relatively small, but its profit margin is also small。But only when the input tax is not passed on and the output tax is passed on, the enterprise profit after the replacement of business tax with VAT is the largest。Therefore, in order to reduce the tax burden after replacing business tax with VAT, enterprises will transfer it upward and downstream as much as possible。

    Impact on commercial real estate

    Commercial real estate and high-end buildings benefit the most

    The inventory of commercial real estate is worse than that of residential real estate。"Commercial real estate will enter the deep winter in the next two years," Wang Yao, director of the All China Commercial Information Center, said recently。According to the statistics of the China Commercial Real Estate Alliance, the area of commercial real estate for sale is 2.700 million square meters, residential area for sale is 4.500 million square meters。Real estate sales in a year 12.800 million square meters, of which 11.100 million square meters are residential, only 1.700 million square meters are commercial, from the point of view of the area for sale, the proportion of residential is much smaller than commercial real estate, but the inventory is 35 percent.7% is commercial real estate。

    After the implementation of the replacement of business tax with VAT, the purchase of real estate such as commercial real estate and industrial real estate will be subject to VAT deduction as the purchase of equipment。This will benefit the sales of commercial and industrial real estate, and increase the investment of general enterprises in holding properties, helping to reduce the inventory of office buildings。

As stipulated in the Notice,For real estate acquired after May 1, 2016 and accounted for in the accounting system as fixed assets or real estate acquired after May 1, 2016 under construction,The input tax shall be deducted from the output tax in two years from the date of acquisition,The deduction is 60 percent in the first year,The deduction is 40% in the second year。The acquisition of real estate includes the acquisition of real estate in various forms such as direct purchase, acceptance of donations, acceptance of investment shares, self-construction and debt repayment, excluding real estate projects developed by real estate development enterprises on their own。

    "This may make enterprises change their thinking, so that enterprises that currently choose to rent office buildings are more inclined to buy commercial properties.。And the current property purchase needs, new businesses or are leasing office buildings will be more touched, or will accelerate the pace of their purchase of commercial property。"Nianda analysis believes。

    Under normal circumstances, the average land price level of commercial projects is about 20% or more higher than that of residential projects, and their average construction price is about 50% or even more than 1 times higher than that of residential projects. High inventory brings financial pressure to commercial real estate developers than the traditional residential market。If the business tax is changed to value-added tax, these high construction and installation costs can be offset in the early stage, greatly easing the financial pressure of commercial real estate developers。If the cost of land could also be included in the deduction, the tax burden on commercial property would be even lower。

    Replacing business tax with value-added tax is also a big benefit for high-end projects with fine decoration projects and high added value。

    Nie Anda believes that the increase in the proportion of sales of refined decoration houses will help developers to obtain more fixed assets and materials VAT invoices to be deducted, increasing the proportion of overall construction and installation costs to the total cost。In terms of proportion, the corporate tax burden is reduced, thereby increasing the profit room。

    It is expected that after the replacement of business tax with value-added tax, the cost of fine decoration can be deducted as input, and the proportion of fine decoration houses will be further increased, which will benefit developers with a relatively high proportion of fine decoration to seize market share。

    The impact on the second-hand housing market

    The tax burden of second-hand housing transactions will only be reduced and not increased

    This "business tax to VAT" for the first time involves natural persons paying VAT collection and management, such as personal second-hand housing transactions。This means that after May 1, the business tax on second-hand housing transactions will also be changed to value-added tax。In the context of national tax reduction, the replacement of business tax with value-added tax will reduce the cost of real estate transactions。

    The circular stipulates that in areas other than Beijing, Shanghai, Guangzhou and Shenzhen, individuals who buy houses less than two years ago and sell them abroad will pay the full value-added tax at the 5% levy rate.Individuals will purchase more than 2 years (including 2 years) of housing sales, exempt from value-added tax。

    For Beijing, Shanghai, Guangzhou and Shenzhen, the four first-tier cities,Individuals will buy less than two years of housing for sale,Pay VAT in full at the rate of 5%;Individuals will purchase non-ordinary housing for more than 2 years (including 2 years) for external sales,The difference between the sales income and the purchase price shall be subject to VAT at the rate of 5%.Individuals will buy more than 2 years (including 2 years) of ordinary housing for foreign sales,VAT exemption。

    This means that the transition period to replace the business tax for second-hand housing transactions with a value-added tax has completely shifted the current business tax policy for second-hand housing transactions。The current sales tax rate is 5.Therefore, replacing business tax with VAT will not bring about an increase in tax burden。

    Yan Yuejin, research director of the think tank Center of the E-House Research Institute, analyzed that for non-first-tier cities, whether it is non-ordinary housing or ordinary housing, the value-added tax will be lower than the business tax within two years;After two years, both sales tax and VAT are zero。For non-ordinary housing in first-tier cities, the value-added tax is lower than the business tax in the first five years;After 5 years, the value-added tax needs to be paid, but the business tax is 0。For ordinary housing in first-tier cities, the value-added tax is lower than the business tax in the first two years;2 to 5 years, VAT is 0, business tax is required to pay;After five years, VAT will be zero and sales tax will be zero。

    The definition of ordinary residence varies from Beijing to Shanghai to Guangzhou to Shenzhen。Among them, the definition of Shanghai ordinary residential is: more than five floors (including five floors) multi-high-rise housing, and less than five floors of old apartments, new lane, old lane and so on;The building area of a single set is less than 140 square meters;The actual transaction price is lower than the average transaction price of housing on the same level of land 1.Below 44 times, simply put, is less than 4.5 million yuan/set located within the inner ring line, less than 3.1 million yuan/set between the inner ring line and the outer ring line, and less than 2.3 million yuan/set outside the outer ring line。

    In other words, in Shanghai, the above three conditions must be met at the same time to be considered as ordinary commercial housing, so that you can enjoy the current VAT reduction and exemption。

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