Author：Ice Li（China Accountant, HW Wealth Succession Family Office）

New regulations on VAT and property tax take effect on October 1 this year, impacting the way Taiwanese enterprises manage factory lease and property tax planning in Mainland China.

1. VAT (Value-Added Tax)

In the past, for general taxpayers, if the property for lease is acquired before April 30 2016, they may opt to apply a simple tax computation method and pay VAT at 5%. However, for a property for lease acquired after May 1 2016, they will have to adopt a regular computation method and pay VAT at 9%.

From October 1 2021 onwards, if a house leasing agent leases a house to an individual, a simple tax computation method can be applied with a reduced VAT rate from 5% to 1.5%. It means all qualified house leasing agencies can enjoy up to 70% of tax savings in VAT in the new change.

For Taiwanese enterprises in the house leasing industry adopting advance payment, their VAT obligation must start from the day of payment receipt. However, if there is a contract which states the date of payment, then the stipulated day will be the start of the obligation. That is, the agents should stipulate the day of payment receipt after October 1 2021 so that they only have to pay 30% of VAT.

The State Taxation Administration introduced the “Interim Measures for the Administration of Collection of Value-Added Tax on Taxpayers' Provision of Immovable Property Operating Lease Services” as early as March 2016, in which a leasing agent pays VAT with a tax rate of 1.5%. In “Several Opinions of the General Office of the State Council on Accelerating the Cultivation and Development of the Home-Rental Market” in June the same year, it also offers a VAT deduction from 5% to 1.5% for leasing house to individuals. The policy emphasized on tax reduction and exemption for individuals, but now the new rule also benefits leasing agencies

2. Property tax

In the past, leasing agents needed to pay 12% of net rental income as Property Tax. Starting from October 1 2021, if the agents lease housing property to individuals or large-scale leasing companies, the Property Tax will be levied at a reduced rate of 4%, which means all qualified agents can save 2/3 Property Tax...