Jane Lai
THE Shenzhen Municipal Administration of Local Taxation said it would postpone changing the way property tax for pre-owned housing was collected.
The administration will impose the tax according to property market value rather than prices stipulated in contracts.
Earlier reports said the new move would be adopted Nov. 1. It was delayed because the tax authorities were not ready for the new tax calculation method, which would involve dozens of communities in the city, and the city s urban planning, land and resources commission needed to update the system, said Yang Long, spokesperson and vice head of the administration.
But whatever adjustments were made, it would still pursue its aim to crack down on yin-yang contracts, the official said.
A yin-yang contract is an open secret becoming too common in real estate trading where the vendor and the buyer have one version of the contract and authorities are provided with another. It has become common to avoid paying title deed tax, capital-gain tax and turnover tax in real estate transactions involving pre-owned housing.
In practice, the yin is the genuine purchase contract retained by the vendor, the buyer and the real estate agency, while the yang contract is sent to the database of authorities recording a much lower sum to avoid higher taxes.
The bureau and the city planning, land and resources commission were determined to curb the rising trend. They had started drafting a plan and recently organized a forum for property experts, residents, real estate agencies and government officials to exchange ideas about details.
If a pre-owned apartment price submitted to the authorities is obviously much cheaper than it should be, we have the right to revalue it, Yang said.
Sources said there were two choices. One was to impose tax according to the price in the contract and there must be comprehensive material to prove the price and the other was to let taxation authorities value the property. This would apply to underpriced yin-yang contracts.
The existing taxes for pre-owned housing transactions include turnover tax and capital-gain tax levied on the vendor, as well as the title deed tax levied on the buyer.
The new way of tax collection would necessarily push up the cost for the vendor and the buyer, and real estate agencies would see their profits significantly reduced, industry insiders said.
Last week, sales of pre-owned apartments rebounded, nearly doubling the previous week s sales. Property experts said the rebound was related to speculation that the new policy would be implemented Nov. 1, causing some concern for people because of the potential to push up costs.
The municipal government launched tighter restrictions on home purchases in early October. Families with residency status are now limited to buying two homes while those without a permit are allowed to buy one if they can show they have paid taxes in the city for at least a year.
Official data showed that the latest curb had caused housing transactions to slump by as much as 40 to 60 percent in one week.
