State Administration of Taxation, Circular on Issues Relevant to the Levy and Collection of Individual Income Tax on Income Derived from the Transfer of Individual Residential Premises

Issued: July 18 2006
Effective: as of August 1 2006 for Article 2

Main contents: When calculating the taxable income for individual income tax on income derived from the transfer of individual residential premises, a taxpayer may, subject to the check and approval of the tax authority, deduct the original value of the premises, taxes paid in the course of transferring the premises and relevant reasonable expenses from the transfer income. The Circular defines the "original value" in the case of premises such as commodity premises, self-built premises and purchased public residential premises. It also defines "reasonable expenses" as expenses such as home furnishing expenses, interest on housing loans, handling fees and notary expenses actually paid by taxpayers in accordance with provisions (Article 2). Where the original value of the premises and the tax payable cannot be correctly calculated, the individual income tax payable shall be determined within a range of 1% to 3% of the income derived from the transfer of the premises (Article 3). For residential premises purchased for personal use for at least five years and that are the only residential premises for the family, the income derived from the transfer thereof by an individual shall be exempted from individual income tax (Article 5).
Related legislation: PRC Individual Income Tax Law (3rd Revision), Oct 27 2005, CLP 2006 No.7 (CLP website); Circular on Issues Relevant to the Levy of Individual Income Tax on the Sale of Housing by Individuals, 1999; Regulations for the Administration of the Demolition and Removal of Urban Housing, Jun 13 2001, CLP 2001 No.6 p.20; Circular on the Issue of the , 2003; Circular on Further Strengthening the Administration of Tax Collection on Real Property, 2005; Circular on Several Specific Problems Concerning Administration of the Implementation of Integration on the Real Property Tax Collection, 2005; Circular on the Issue of the <MEASURES on of the Administration em Accounts,2005 and PRC Administration of Tax Collection Law (Revised), Apr 28 2001, CLP 2001 No.5 p.12