Taxation on landed property

RENTAL INCOME

Rental income from properties owned by non-resident foreign investors are subject to the following taxes: -

Type of tax Rate

1. Income tax 20% on rental income
2. Business tax 5% on rental income
3. City property tax 18% on rental income

The resident tenant has an obligation to withhold taxes upon the payment of rental to the foreign owner. On the other hand, the foreign owner can appoint a domestic tax agent to act for it. The tax agent will apply for a temporary tax registration on behalf of its principle, and obtain the tax invoices at the tax office upon payment of taxes.

Both the foreign owner and the domestic tenant shall also pay stamp tax respectively at a rate of 0.1% on the rental amount. In addition, the tenancy agreement shall be registered at the local administrative organs. Thirdly, the landlord shall ensure that it has got a lease certificate for the rented property.

TRANSFER OF PROPERTY

Non-resident foreign investor receiving consideration for the transfer of landed property located in the PRC will be subject to the following type of taxes: -

Type of tax Rate

1. Income tax 20% on consideration
2. Business tax 5% on consideration
3. Stamp duty 0.05% on consideration
4. Land value appreciation tax 30% - 60% depending upon the appreciated value

Land value appreciation tax is levied on 4 different brackets of the appreciated value, which is arrived at by reference to the selling price minus the direct cost and the statutory deductions including business and stamp taxes. The income tax rate will be reduced to 10% if the owner is a resident of a PRC treaty country.

The buyer, on the other hand, has to pay a deed tax at the rate of 3% on total consideration irrespective of whether he is a resident or a non-resident.