Farm Land Occupation Tax
15 Farm Land Occupation Tax
This tax is levied on occupied farmland for the purpose of strengthening land administration, properly utilizing land resources, and protecting farmland. The Provisional Regulations of the People's Republic of China on Farm Land Occupation Tax [FLOT) currently in force were promulgated and implemented on April 1, 1987.
FLOT is administered and collected by the local financial departments and local tax departments. The revenue collected belongs to the local governments. In 2003, revenue from FLOT amounted to 9.24 billion yuan, accounting for only 0.5% of China's total tax revenue.
Entities Subject to Tax
Any of the following entities that occupy farmland for building construction or for other non-farm purposes may be subject to tax:
- State-owned enterprises (SOEs), collectively-owned enterprises, private enterprises, joint-equity enterprises, and other enterprises.
- Administrative units, non-profit institutions, social organizations, and other units.
- Individual businesspersons and other individuals.
Enterprises with Foreign Investment
Under Ministry of Finance rules, enterprises with foreign investment should pay FLOT in certain cases (such as when they occupy farmland for realty development).
The tax covers both State-owned and collectively owned land. The tax base is the area of farmland actually occupied by the taxpayers.
What Constitutes Farmland
The following types of land fall into this category:
- Land for planting crops, including grain and economic crops.
- Land for vegetables.
- Garden plots (e.g., nursery land, flower gardens, tea land, fruit gardens, mulberry fields, land for other economic wood plantation).
- Newly cultivated wasteland, idle land, crop rotation land, and grass rotation plant land.
What Constitutes Occupation
The following scenarios constitute occupation of farmland:
- Where the land occupied was once used for crop plantation, no more than 3 years before the date of occupation.
- Where the land occupied relates to fish pools, or to other agricultural land used for building construction or other non-agricultural construction.
Determining Whether to Impose Tax
Whether tax should be levied on the occupation of the following types of land that have already been cultivated for plantation and breeding, shall be determined by each province/autonomous region/municipality directly under the State Council, after considering local conditions:
- Bodies of water such as lakes, rivers.
- Forestry land.
Where taxpayers have obtained permits for occupying farmland, but fail to start using the land within 2 years, the tax collection department shall impose additional FLOT, up to 2 times the applicable tax per unit prescribed.
Ranges for tax per unit are formulated based on the average area of farmland occupied per person and local economic situations (see Table 15.1).
Determining Applicable Tax Per Unit
The applicable ranges shall be determined by the People's Government of each province/autonomous region/municipality directly under the State Council, within the ranges stipulated in Table 15.1.
Each province/autonomous region/municipality directly under the State Council should stipulate the applicable range for the counties within its jurisdiction. The weighted average should not be lower than the average as assessed by the Ministry of Finance.
Within the counties, the applicable ranges may also vary from town to town, or village to village.
|Table 15.1 Tax per unit|
|Administrative region at county level||Standard range for tax per unit (yuan/sq m)|
|1. Average size of farmland per person in the county is less than 1 mu||2.00–10.00|
|2. Average size of farmland per person is more than 1 mu but less than 2 mu||1.60–8.00|
|3. Average size of farmland per person is more than 2 mu but less than 3 mu||1.30–6.50|
|4. Average size of farmland per person is more than 3 mu||1.00–5.00|
Where appropriate, tax per unit may be raised in the following areas, but the increment should not exceed 50% of the original amounts stipulated:
- Special Economic Zones.
- Economic and Technological Development Zones.
- Economically developed regions with a very low average figure for farmland per person.
To harmonize tax ranges for different jurisdictions so as to avoid sharp differences between neighboring jurisdictions and to ensure the State's tax revenue, the Ministry of Finance has assessed the average tax per unit for all provinces/autonomous regions/municipalities directly under the State Council.
- Shanghai: 9 yuan.
- Beijing: 8 yuan.
- Tianjin: 7 yuan.
- Chongqing: 4.50 yuan.
- Jiangsu, Zhejiang, Fujian, Guangdong, Hainan: 6 yuan.
- Liaoning, Hubei, Hunan: 5 yuan.
- Hebei, Shandong, Jiangxi, Anhui, Henan, Sichuan: 4.50 yuan.
- Guangxi, Guizhou, Yunnan, Shaanxi: 4 yuan.
- Shanxi, Heilongjiang, Jilin: 3.50 yuan.
- Inner Mongolia, Gansu, Ningxia, Qinghai, Xinjiang: 2.50 yuan.
- Tibet: No FLOT is levied at the moment.
Tax payable is based on the area of farmland actually occupied by the taxpayers and the applicable tax per unit prescribed. It is settled in one instance.
Computing Tax Payable
In general, the following formula is used to calculate tax payable:
Tax payable = Area of farmland actually occupied by taxpayer × Applicable tax per unit
An enterprise occupies 8,000 sq m of farmland for factory construction. The local applicable tax per unit is stipulated as 6 yuan/sq m.
Tax payable = 8,000 sq m × 6 yuan/sq m = 48,000 yuan
Exemptions or reductions may be granted under various circumstances.
Where land that was previously tax-exempt is no longer eligible for exemption because the purpose for which the land is to be used has changed, the tax payable should be made up at the time of the change.
Items Eligible for Exemptions
The types of land discussed below may be exempt:
Exemptions may be granted for land used for railroads or airports.
Where land is used for the construction of national/provincial roads in western China, exemptions may be granted, in line with the exemptions related to railroads and airports.
The People's Government at the provincial level may determine whether to grant exemptions for land used for other types of road construction.
Where land is used for the construction of new houses because countryside residents have to be relocated from their original houses, where the land used is not larger than the land used for the original houses, and where the original land has to be recovered for farm planting, exemptions may be granted.
Where land is occupied for the construction of community service facilities for the aged in the cities, places of activities or homes caring for the aged in the countryside, and where the funds used are provided by the social welfare lottery or by donations from units or individuals, exemptions may be granted.
- Land for military facilities.
- Land for warehouses that store explosives.
- Land for kindergartens, schools, houses for the aged, or clinics/hospitals.
- Land for farm irrigation facilities that directly serve the agricultural production (excluding water conservation projects intended mainly for power generation or tourism).
- Land for building construction related to the relocation of immigrants forced to move because of reservoir construction or natural calamities, or to the relocation of refugees.
- Land for funeral parlors or crematoriums.
Items Eligible for Exemptions/Reductions
Under the following scenarios, reductions or exemptions may be granted:
Land used for the construction of motorways may be taxed at lower rates.
- 2 yuan/sq m in areas where the statutory tax per unit exceeds 5 yuan.
- 1.5 yuan/sq m in areas where the statutory tax per unit is 5 yuan or less.
Where farmland is occupied temporarily because of road construction needs, tax may be exempt if the occupation does not exceed 1 year, and if the land reverts into farmland after the construction. Otherwise, tax shall be levied as discussed above.
Welfare-Related Road Constructions
Reductions or exemptions may be granted if taxpayers face real difficulties in paying tax, where the land relates to roads constructed by the State to provide work, rather than welfare relief, in the following areas, upon examination by the financial department in the relevant province and approval by the Ministry of Finance.
- Old revolutionary base areas.
- Minority nationality areas.
- Remote mountain regions.
Building Construction by Needy/Special Individuals
Reductions or exemptions may be granted to the following taxpayers if they build new houses in accordance with stipulated standards for land use, and if they face real difficulties in paying tax, upon examination by the People's Government in the relevant village and approval by the People's Government in the county where the application for reduction or exemption is submitted.
- The families of revolutionary martyrs.
- Revolutionary military service personnel who are handicapped.
- Widows and orphans living in the countryside.
- Farmers facing economic/financial hardships in old revolutionary base areas, minority nationality areas, or remote mountain regions.
- Where land is used for the construction of new houses for countryside residents, 50% reductions may be granted.
- Where factories are set up by the Civil Affairs Department to provide employment for the handicapped, certain tax reductions may be granted, based on the proportion of handicapped workers employed.
- Where land is used for farm irrigation facilities that do not directly serve agricultural production but are part of key water control projects, the levy may take into account the extent to which the facilities are directly effective in serving agriculture, relative to the total effectiveness of the project.
- Where units or individuals occupy farmland temporarily, using permits whose periods exceed 1 year, they may be levied at half the applicable tax per unit. Where they occupy the land for more than 2 years, they may be levied at the applicable per unit, starting from the third year of occupation.
After approving the use of farmland by enterprises, units, or individuals, the Land Administration Department should inform the occupiers in a timely fashion to pay tax, or to complete formal applications for exemptions or reductions at the designated places, within the prescribed time limits.
The taxpayers should make payment within 30 days of the approval given by the Land Administration Department to occupy the land.
The Land Administration Department shall issue documents for use of the land, handle the registration of land title changes, or allocate land, on the basis of the certificates provided by the taxpayers showing that tax has been paid.
Places for Payment
Taxpayers should bear in mind that the tax collection department and the occupation approval department must be at the same level. In other words, the level of the land administration department approving the occupation determines the level of the collection department collecting the tax.
Therefore, the taxpayers should make payments to the tax collection department that is at the same level as the Land Administration Department from which they obtained approval to occupy the land.
Other modes may by chosen, such as prepayment of tax, joint collection by the Land Administration Department and the tax collection department, or withholding by banks.
Applications for Reductions/Exemptions
Submission Procedure for Taxpayers
Where taxpayers wish to apply for reductions or exemptions, they should apply to the tax collection department that is of the same level as the Land Administration Department from which they obtained approval to occupy the land, within 30 days of the date that approval is granted for the land use.
Where the use of the farmland is approved by the State Council or the Ministry of State Land Resources, the formalities shall be handled by the tax collection department at the provincial level.
Filing Procedures for Collection Departments
- Land exceeding 1,000 mu: Where the application for reduction or exemption relates to the occupation of farmland exceeding 1,000 mu in size, the collection department should file the records with the SAT within 30 days of the completion of the formalities.
- Land less than 1,000 mu: Where the application for reduction or exemption relates to the occupation of farmland less than 1,000 mu in size, the procedure shall be formulated by the collection department at the provincial level.