City and Township Land Use Tax
10 City and Township Land Use Tax
This tax is levied to facilitate proper utilization of city and township land, and to regulate the different proceeds from different grades of land. The Provisional Regulations of the People's Republic of China on City and Township Land Use Tax were promulgated by the State Council on September 27, 1988, and came into effect on November 1 of the same year.
City and Township Land Use Tax is administered and collected by the local tax bureaus. The revenue collected belongs to the local governments. In 2003, revenue from City and Township Land Use Tax amounted to 9.16 billion yuan, accounting for only 0.5% of the country's total tax revenue.
Entities Subject to Tax
Where any of the following entities, excluding enterprises with foreign investment, foreign enterprises and foreigners, utilize land within the boundaries of a city, county, specified township, and/or mining district, they shall be subject to tax.
- State-owned enterprises, collectively-owned enterprises, private enterprises, joint-equity enterprises, and other enterprises.
- Administrative units, non-profit institutions, military units, social organizations, and other units.
- Individual businesspersons and other individuals.
Tax is normally paid by the owners of the land-use rights. The following situations are exceptions:
- Where the taxpayers who own the land-use right are not located on the land, the custodians or the actual users of the land shall be the taxpayers.
- Where the land-use rights have not been defined, or where disputes over rights entitlements have not been resolved, the actual users of the land shall be the taxpayers.
- Where the land-use rights are commonly owned by more than one party, each party shall pay tax based on the size of the actual area that the party uses.
What Constitutes Taxable Land
Taxable land includes land owned by the State or land owned collectively in areas prescribed by the prevailing regulations.
Tax payable on an area of land shall be calculated based on the applicable tax per unit, after taking into consideration the type of land involved and the economic development conditions in the area.
Which areas fall within the scope of the tax is discussed below:
- Cities: The tax covers both urban and suburban areas.
- Counties: The tax covers the towns where the county government is located.
- Townships: The scope of the tax shall be proposed by the local tax bureaus at the provincial level, and their proposals submitted to the People's Government at the provincial level for approval before execution. The scope decided upon shall be reported to the State Administration of Taxation (SAT) for record-keeping.
- Mining districts: These are heavily populated areas with thriving industrial and commercial sectors, and large and medium-sized mining enterprises, that have not set up townships though they meet township criteria.
Classifications are based on the size of the non-agricultural population in both urban and suburban areas, as officially registered by the Public Security Department, in accordance with State Council rules.
- Large cities: Population exceeds 500,000.
- Medium-sized cities: Population exceeds 200,000 but falls below 500,000.
- Small cities: Population falls below 200,000.
Determining Applicable Tax Per Unit
The People's Government at the provincial level shall determine the applicable ranges for areas under their jurisdiction, within the limits prescribed in Table 10.1, after taking into consideration the city's construction and level of economic prosperity.
For example, Sichuan Province applies the following ranges:
- Large cities: 2–8 yuan/sq m per year.
- Medium-sized cities: 1–6 yuan/sq m per year.
- Small cities: 1–4 yuan/sq m per year.
- Counties: 0.50–3.00 yuan/sq m per year.
- Townships, mining districts: 0.20–2.00 yuan/sq m per year.
Beijing has applied the following tax amounts:
- Large cities: 10 yuan/sq m per year.
- Medium-sized cities: 8 yuan/sq m per year.
- Small cities: 6 yuan/sq m per year.
- Counties: 4 yuan/sq m per year.
- Townships: 1 yuan/sq m per year.
- Mining districts: 0.50 yuan/sq m per year.
The People's Government at the county level may divide the land within their jurisdictions into various levels based on actual conditions, and formulate applicable ranges that fall within the ranges specified by the People's Government at the provincial level.
|Table 10.1 Tax amount ranges|
|Area||Tax range per unit (yuan/sq m)|
|1. Large cities||0.50–10.00|
|2. Medium-sized cities||0.40–8.00|
|3. Small cities||0.30–6.00|
|4. Counties, specified townships, and mining districts||0.20–4.00|
They shall submit their proposals to to the People's Government at the provincial level for approval before execution.
Economically Backward/Advanced Areas
Where approval is granted by the People's Government at the provincial level, the tax per unit may be lowered.
However, the revised amount may not be more than 30% lower than the lower limit of the prescribed range.
The tax per unit may be raised, but the proposed amount has to be reported to the Ministry of Finance for approval.
Tax is calculated based on the area actually occupied by the taxpayer and by applying the prescribed tax per unit.
Determining Land Area
Tax liability is based on the size of the land actually occupied, as measured using units specified by the People's Government at the provincial level.
Where the areas have not been measured yet, but where the taxpayers hold the land-use certificates issued by the governments, the size shall be as indicated in the certificate.
Where there is no certificate, the taxpayers should truthfully declare the size of the land.
Calculating Tax Payable
In general, the following formula is used to compute tax payable:
Tax payable = Area of land actually occupied by taxpayer × Tax amount per unit
An enterprise actually occupies 10,000 sq m. The applicable tax amount stipulated by the local government is 5 yuan/sq m per year.
Tax payable = 10,000 sq m × 5 yuan/sq m = 50,000 yuan
Exemptions or reductions may be granted under various circumstances. Among other factors, the tax authorities shall consider local conditions before granting any exemptions or reductions.
Local tax bureaus at the provincial level shall consider local conditions before deciding whether to levy tax on the following types of land:
- The land of houses and yards owned by individuals.
- Dormitory land used for family members of employees of tax-free units.
- Welfare factory land, where the factories are set up by the Civil Affairs Department, and where they have a certain percentage of handicapped staff.
- The land of various schools, hospitals, kindergartens, and nurseries run by collective units or individuals.
Applying for Exemption/Reduction in Cases of Hardship
Where the taxpayers have difficulty paying the tax and request for tax exemption, they should report to the local tax bureaus for examination and the local tax bureaus at the provincial level for approval.
In principle, no exemptions or reductions shall be granted where the difficulty arises from the absence of State encouragement, or where the reasons are subjective.
Where the case involves sectors restricted by the State, or where the enterprises have no justifiable right to occupy the land, no exemptions or reductions shall be granted.
Health Care-Related Institutions
Where the land of non-profit medical institutions, disease control institutions, women and child care institutions, or health institutions is allocated for self-use, it may be exempt.
Where income earned by profit-making medical institutions is used directly to improve medical and health conditions, any land for their self-use may be exempt for 3 years, starting from the date that they receive their business licenses.
Science and Research Institutions
Where the land of non-profit science and research institutions is allocated for self-use, it may be exempt.
Institutions that Become or Join Enterprises
Where science and research institutions that satisfy the criteria become enterprises or join enterprises, land used for science and research development may be tax exempt for 5 years, starting from the date that the change becomes effective.
Where non-profit institutions serving the aged have investments from government department, institutional units, social organizations and/or individuals, land allocated for their self-use may be exempt.
Mountain/River Areas, Wasteland
Land developed for mountain/river areas or wasteland that has been improved shall, upon approval, be exempt for 5–10 years, starting from the date that the land is put into operation.
Energy, Transport Development
Land occupied for energy and transportation development may be exempt.
Other types of land as stipulated by the State may also be exempt. These relate mainly to enterprises involved in coal, oil, gas, power, railways, civil aviation, or ports.
Where land is directly utilized for production in the agricultural, forestry, animal husbandry, or fishery industries, or where land is used for water reservation and protection, the land may be exempt.
Excluded from such exemptions is land used for agricultural by-product processing, or for living or office space.
Where tax-free units freely use the land of taxpaying units (such as when the police or Customs departments use the land of railway stations, airports or ports), exemptions may be given.
Where taxpaying units freely use the land of tax-free units, tax has to be paid by law.
- Land occupied by government organs, people's organizations, or military units for self-use.
- Land occupied by units for self-use that are financed by the institutional allocation of funds from State financial departments.
- Land self-used by enterprises for schools, nurseries, or kindergartens.
- Land occupied by religious temples, parks, or historic scenic spots (excluding land used for business operation units, such as restaurants or tea shops).
- Land for public use whose upkeep is carried out by the Municipal Administration, such as streets, squares, or greenland.
Temporary exemptions may be granted for the following types of land:
- Land used for preventing fires, explosions or poisoning that is needed by warehouses or factory buildings that store dangerous articles, upon approval by the local tax bureaus at the provincial level.
- The land surrounding or containing bare mountains, forests or lakes within the premises of the enterprises not in use.
- Land not in use after the move of the enterprises to another place.
Time Limits on Payment
Tax is calculated on an annual basis and paid in installments. The time limit for payment shall be determined by the People's Government at the provincial level, after considering local conditions.
At present, tax is generally paid on a quarterly or biannual basis, with the timeframe for reporting and payment being 15 days or 1 month. For example, Beijing stipulates that tax should be paid in two installments, which should be paid over the periods April 1–15 and October 1–15.
Land that has been Newly Taken Over
Where farmland has been newly taken over, tax should be paid 1 year after the date on which the taking over was approved.
Where non-farmland has been newly taken over, tax should be paid in the month following the month in which the taking over was approved.
Newly Constructed Commercial Houses
Where newly constructed commercial houses are acquired, tax should be paid in the month following the one in which the houses are delivered for use.
Commercial Houses Constructed by Realty Development Enterprises
Where realty development enterprises self-use, lease, or lend commercial houses they have constructed, tax should be paid in the month following the one in which the houses are first used or delivered.
Where stock houses are acquired, tax should be paid in the month following the one during which formalities such as the transfer of the house title and the change in registration are handled, and the Realty Title Registration Department issues the house ownership certificate.
For the houses that are leased or lent out, tax should be paid in the month following the one in which the houses are delivered for leasing or lending.
Place for Payment
In general, tax is paid to the tax office in the locale where the land is situated.
Land Under Different Jurisdictions
Where the land used by taxpayers falls under the jurisdiction of different provinces/autonomous regions/municipalities directly under the State Council, tax should be paid separately to the tax offices in the various jurisdictions.
Where the taxpayers use cross-region land that falls within one province/autonomous region/municipality directly under the State Council, the local tax bureaus at the provincial level shall determine where tax should be paid.