First batch of cases involving 20% profit tax: borne by the buyer

By | April 20, 2013

According to the CCTV News, reporter learned from a large real estate agency in Beijing that the first batch of second-hand housing transactions in Beijing had been recorded after the implementation of the new policies known as the “National Five Rules On Housing Market(国五条)”. Among many of these cases, the required 20% profit tax had been charged.

In the earliest case in relate to payable 20% profit tax in Beijjng which involved a second-hand house in the Fengtai District, Beijing, the house has a total area of ​​127 square meters, and was priced at 2.8 million yuan (US $448,000), this house had previously been purchased at price of 1.4 million yuan (US $224,000), the transaction profit was 140 million, thus the amount of tax payable would be: 1.4 million yuan x20%, which is 280,000 yuan (US $44,800).

In accordance with the provisions of the new policy, this should be a tax borne by the seller. But in this case, buyers and sellers made a consultation and finally it was decided that the tax was borne by the buyers.

Editor’s note: Closed monitoring of more future cases would be necessary to judge the effect of the policy. Now it seems that the tax policy is never as optimistic as the policy makers had predicted, buyers may be forced to pay the tax in a seller’s market.

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