Property tax in China could spell big changes for market
Speculation that a property tax will be introduced in China is hotting up, as legal process could be in place by March 2019.
Currently Chinese residents are only taxed when they buy or sell a property, and the proposed introduction of an annual property tax has become a highly contentious issue.
The belief is that if a tax was introduced on existing homes, it would deter people from buying multiple properties – therefore giving first-time buyers a better chance of getting on the property ladder.
The Chinese government had the idea of taxing owners of residential flats, the biggest part of Chinese households’ wealth, for many years – in a bid to slow rapidly increasing house prices.
However, many people argue that, unlike other countries, Chinese citizens do not actually own the permanent rights to their homes, they just hold 70-year leases on the properties and therefore should not be forced to pay any property tax.
Others also fear that a new tax would seriously dampen the property market – a huge part of the Chinese economy and one that is already cooling.
But, in an article published by the communist party’s flagship newspaper just before Christmas, finance minister Xiao Jie confirmed that a tax will be introduced and that it will be based on “appraisal value”.
“Existing industrial and commercial properties, as well as individual houses, will be taxed on the basis of an appraisal value, while current taxes on new builds will be lowered,” he said.
However, an official announcement is yet to be released.
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