Urban real estate tax in China is a tax levied on urban real estate under the provisions of the Provisional Rules on Urban Real Estate Tax(the “PRUPET”).

The following are the critical points in relation to urban real estate tax.

Taxpayers

1. The enterprises with foreign investment, foreign enterprises and foreigners, and levied on house property only.
2. The taxpayers are owners, mortgagees custodians and/or users of house property.

Tax Base

There are two types of tax base:

1. one is based on the price of the house property.
2. The other is based on the rental income from leasing the house property.

Tax Rates and Calculations

Two different rates are applied to two different bases:

1. One rate of 1.2% is applied to the value of house property,
2. The other rate of 1.8% is applied to the rental income from the property.

The formula for calculating real estate tax payable is:

Tax payable = Tax base ×Applicable rate

Exemptions and Reductions

1. Newly constructed buildings shall be exempt from the tax for three years commencing from the month in which the construction is completed.
2. Renovated buildings for which the renovation expenses exceed one half of the expenses of the new construction of such buildings shall be exempt from the tax for two years commencing from the month in which the renovation is completed.
3. Other house property may be granted tax exemption or reduction for special reasons by the People’s Government at provincial level or above.

Tax Payment

Urban real estate tax shall be assessed by the local competent tax authority on annual basis, and paid by the taxpayer in quarterly installments or in half-yearly installments. The specific time limit for tax payment shall be determined by the local competent tax authority.