I. Provisions of Jiangsu Region

Tax regulations of the Soviet Union2012:1"If the same development project contains multiple types of real estate, land value-added tax shall be paid according to the following categories, including income, deduction of project amount, value added and value added rate: (1) ordinary standard housing; (2) other types of houses (including ordinary houses and non-ordinary houses); And (3) non-residential properties."

Tax regulations of the Soviet Union2015:8The proclamation stated: "Since2016years3month1From date on, if the same liquidation unit contains ordinary houses, non-ordinary houses and other types of real estate, the income, the amount deducted, the value added, the value added rate and the tax payable shall be calculated separately."

As can be seen from the above provisions, Jiangsu requires land value-added tax liquidation in accordance with the "three division law", which is currently implemented in most areas of the country.

Ii. Purpose of classification liquidation

The author believes that the classification liquidation has two main purposes: one is to tax free items (value added rate of ordinary housing20%The following exemptions) are accounted for separately (usually to the taxpayer's benefit); The second is to organise more tax revenue (usually to the detriment of taxpayers).

The second purpose is just the author's personal presumption: since the land value-added tax does not allow the profit and loss offset between different projects, also does not allow the profit and loss offset between different liquidation types (currently, the profit and loss cannot be offset before liquidation and after liquidation), and the applicable tax rate is the excess rate progressive tax rate, therefore, if the tax exemption is not taken into account, the more detailed the liquidation type, the higher the tax burden is likely to be.

Iii. Basis of Upper level Law of classification liquidation

1. Rules on land value-added Tax

The detailed rules stipulate: "The land value-added tax is calculated by the most basic accounting items or accounting objects of the taxpayer's real estate cost accounting."

The detailed rules only clarify that the land value-added tax should be calculated according to the project (or accounting object, this issue is analyzed in a separate article), and do not involve the issue of classification, so it can not be used as a policy basis for classification. The detailed rules clearly indicate that the land VAT payable is calculated "by project" rather than "by lot", so the document of project establishment of the National Development and Reform Commission determines the settlement unit of land VAT.

(2) Finance and taxation [1995:48No.

Finance and taxation1995:48Document No. 1 stipulates: "For taxpayers who build ordinary standard housing (note: currently ordinary standard housing is equivalent to ordinary housing, the same below) and engage in other real estate development, the value-added amount shall be calculated separately. If the value added is not calculated separately or cannot be accurately calculated, the tax exemption provisions of Article 8 (1) of the Regulations shall not apply to the ordinary standard houses built by the same party." 

48Document No. 2 calls for separate accounting of ordinary standard homes and other types of property, apparently with the intention of requiring separate accounting for tax exemptions. from48The wording of document No. 2 calls for a "dichotomy" (ordinary residential and other) between tax-free and non-tax-free types.

Some people think,48The document just requires "separate calculation of value-added amount", but does not require separate calculation of value-added rate and land value-added tax payable. The author believes that this point of view is untenable. If the value-added rate is not calculated separately, it is impossible to judge whether ordinary housing can be exempt from tax. If the value-added tax payable is not calculated separately, it will be meaningless to calculate the value-added tax separately.

(3) State tax issuance2006:187No.

State tax issue2006:187"If a development project contains both ordinary housing and non-ordinary housing, the value added shall be calculated separately," the document states.

It should be noted that in the land value tax policy, "non-ordinary residence" is also a residence, not a non-residence.187Document No. 1 clearly requires that the value-added of ordinary houses and non-ordinary houses be calculated separately. From the wording, two points must be given to residential houses, and at least three points should be given to non-residential houses.

(4) State tax issuance2009:91No.

State tax issue2009:91The document requires that "whether the value-added amount and rate of different types of real estate should be calculated separately and the land value-added tax should be paid" during the liquidation review.

91The No. 1 document for the first time clarified the issue of calculating the value-added rate and paying the land value-added tax separately, but did not clarify how to classify "different types of real estate". Therefore, there were two points, three points, four points, five points... And so on.

(5) total tax payment (2015:114No.

Total tax payment2015:114The Land value added Tax Return (I) is required to add subitems of property types, and the subitems are classified as3Each subheading corresponds to a property type. The subitems shall be set and maintained by each province.

As can be seen from the above regulations, from the perspective of land value-added tax return, type liquidation can only be divided into three parts at most. However, there is still no clear classification standard at the level of the State Administration, and provincial tax authorities can stipulate the standards of type liquidation by themselves.

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