China Approves New Stamp and Municipal Development Tax Provisions

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China is on track to accelerate stamp tax and municipal development tax reforms following the passage of a new bill by the Chinese legislature, giving greater discretion to regional authorities.

On 11 August the Standing Committee of China’s National People’s Congress (NPC) passed the “People’s Republic of China Deed Tax Law” (中华人民共和国契税法) and the “People’s Republic of China Urban Maintenance and Construction Tax Law” (中华人民共和国契税法), both of which are scheduled to come into effect on 1 September 2012.

Tax official Wang Jianfan (王建凡) said that the deed tax law would enable province-level governments to apply differentiated tax rates to different entities and regions for the transfer of residential property ownership.

According to Wang the provisions give local government considerable tax management authority, and will be of benefit to making local government more proactive in tax administration, as well as expediting the healthy development of local property markets.

“The release of the deed tax law and urban maintenance and construction laws are key measures for China’s implementation of tax collection,” said Li Xuhong (李旭红), head of the tax policy research office of the National Accounting Institute (国家会计学院), to state media.

“These two laws are of major significance for the improvement of the local tax systems.”

Deed taxes and urban maintenance and development taxes have emerged as a key source of tax revenues for local governments.

According to the “2019 Local Normal Public Budget Revenue Table” issued by the Ministry of Finance (2019年地方一般公共预算收入决算表), last year deed taxes totalled 621.286 billion yuan, accounting for 3.93% of national tax revenues, and 8.07% of local tax revenues.

Urban maintenance and development taxes totalled 461.444 billion yuan, accounting for 3.05% of national tax revenues and 6% of local tax revenues.

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