Interim Regulations of the People's Republic of China on Land Value Increment Tax (Revised in 2011)

Order of the State Council of the People's Republic of China No.588

January 8, 2011

(Promulgated by the Order of the State Council of the People's Republic of China No.138 on December 13, 1993 and revised under the Decision of the State Council on Repealing and Revising Certain Administrative Regulations on January 8, 2011)

Article 1 The Interim Regulations of the People's Republic of China on Land Value Increment Tax (the "Regulations") are formulated to regulate the order of the land and real estate market transactions, to reasonably adjust the revenue from land value increment, and to safeguard the national interests.

Article 2 All entities and individuals receiving income from the transfer of state-owned land use rights, ground buildings and their attachments ( the "transfer of real estate") are taxpayers of the land value increment tax ( the "taxpayers") and shall pay the land value increment tax in accordance with the Regulations.

Article 3 Land value increment tax shall be assessed and collected based on the amount of increased value received by the taxpayers from the transfer of real estate and the tax rates prescribed in Article 7 of the Regulations.

Article 4 The increased amount is an amount of surplus between the income received by the taxpayers from the transfer of real estate and the sum of the deductible items prescribed in Article 6 of the Regulations.

Article 5 The income received by the taxpayers on the transfer of real estate includes monetary income, income in kind and other income.

Article 6 The deductible items in computing the amount of increased value include the following:
1. the amount paid for the acquisition of land use rights;
2. costs and expenses for the development of land;
3. costs and expenses for the construction of new buildings and ancillary facilities, or the assessed value for old houses and buildings;
4. taxes relating to the transfer of real estate; and
5. other deductible items stipulated by the Ministry of Finance (MOF).

Article 7 Four levels of progressive rates will be adopted for the land value increment tax:
For part of the amount of increased value not exceeding 50% of the sum of deductible items, the tax rate is 30%.
For the part of the amount of increased value exceeding 50% but not exceeding 100% of the sum of deductible items, the tax rate is 40%.
For the part of the amount of increased value exceeding 100% but not exceeding 200% of the sum of deductible items, the tax rate is 50%.
For the part of the amount of increased value exceeding 200% of the sum of deductible items, the tax rate is 60%.

Article 8 Taxpayers are exempt from land value increment tax if any of the following circumstances applies:
1. taxpayers construct ordinary residential buildings for sale, and the amount of the increased value does not exceed 20% of the sum of deductible items; or
2. the real estate is taken over or repossessed according to the law due to the construction need the State.

Article 9 For taxpayers falling under any of the following circumstances, the land value increment tax will be assessed and levied according to the assessed value of the real estate:
1. concealment of or false reporting on the real estate transaction price;
2. providing false sum of deductible items; or
3. the transfer price of real estate is lower than the assessed value without proper justification.

Article 10 Taxpayers shall declare tax to the competent tax authorities where the real estate is located within seven days of signing the real estate transfer agreements, and pay the land value increment tax within the period specified by the tax authorities.

Article 11 Land value increment tax will be collected by the tax authorities. The departments for land administration and departments for real estate administration shall provide the tax authorities with the relevant information, and assist them in the collection of the land value increment tax pursuant to the law.

Article 12 For taxpayers that have not paid the land value increment tax according to the Regulations, the departments for land administration and departments for real estate administration shall not process the relevant title change formalities.

Article 13 The collection and administration of land value increment tax are subject to the relevant provisions of the Law of the People's Republic of China on the Administration of Tax Levying and the Regulations.

Article 14 The MOF is responsible for the interpretation of the Regulations and for the formulation of the implementing rules hereof.

Article 15 The Regulations come into force as of January 1, 1994. The measures of each region for the collection of land value increment fees that contravene the Regulations shall cease to be effective on the said date.