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Announcement of Hainan Local Taxation Bureau on Tax Risk Warning for the Sale of Surplus Properties by Real Estate Enterprises after Liquidation

Document No.:Announcement No.1 ,2014 of Hainan Local Taxation Bureau

Taxes:Land Appreciation Tax

Date of Promulgation:

IssueDepartment:Local Taxation Bureaus of Localities

Date of Implementatio:2014-01-27

Annex:

Hainan Local taxation authorities found from tax inspection that some real estate companies sell surplus properties after the liquidation of LAT on real estate projects and still file LAT returns at the pre-levying rate. Such enterprises failed to calculate and pay LAT truly, resulting in under-    payment of taxes, and causing the punishment by taxation authorities for recovery of taxes and   imposition of fine and penalty for late payment. In order to protect the legitimate rights and interests of taxpayers and help taxpayers avoid tax risks, the relevant matters are hereby notified as follows:

 

I. Policies and regulations for tax treatments of the sale of surplus properties after the liquidation of LAT

 

In accordance with Article III of the Notice of Hainan Local Taxation Bureau on Further Strengthening the Administration of Levy & Collection of LAT (Qiong Di Shui Han [2013] No.476):

 

For properties which are not transferred when the LAT liquidation is conducted, if such properties are to be sold or transferred with compensation after the liquidation, taxpayers shall file LAT returns according to regulations, and the amount of deductions shall be calculated according to the unit cost of construction area in liquidation multiplied by the areas sold or transferred.

 

Unit cost of construction area = total amount of deductions in liquidation ÷ total gross floor area in liquidation

 

(1) For those who sell or transfer properties with compensation after the entry of liquidation procedure (i.e., the acceptance of liquidation), the LAT shall no longer be levied in advance.

 

(2) For those who sell or transfer properties with compensation during the liquidation period, after taxation authorities make the liquidation conclusion (i.e., examination & authorized form of LAT liquidation), they need to file tax returns and pay LAT by distinguishing different types, and the tax payment deadline is the 15th of the month after the month when the liquidation conclusion is issued.

 

(3) For those who sell or transfer properties with compensation after the liquidation (i.e., the issuance of liquidation conclusion), they shall respectively file tax returns and pay LAT by distinguishing different types, and the tax payment deadline is the 15th of the month after the month when the sales or bargained transfer is made.  

 

II. Tax-related legal risks of the failure of filing and payment of taxes according to regulations 

 

In accordance with relevant provisions of the “Law of The People's Republic of China Concerning the Tax Administration and Tax Collection”, there are three major aspects of the tax-related legal risks of the failure of filing of tax returns according to regulations:

 

(1) Where a taxpayer fails to file tax returns and to submit tax payment materials within a prescribed time limit or a withholding agent fails to provide reporting schedules and relevant materials on the tax withheld and remitted or collected and remitted to the taxation authorities within a prescribed time limit, the taxation authorities shall charge the taxpayer or withholding agent to remedy the situation within the prescribed time limit and may impose a fine of not more than RMB 2,000 on the taxpayer or withholding agent. In serious cases, the taxation authorities may impose a fine of over RMB 2,000 Yuan but less than RMB 10,000 Yuan on the taxpayer or withholding agent.

 

(2) If a taxpayer fails to file tax returns, fails to pay or underpays the tax payable, the taxation authorities shall seek the payment of the tax unpaid or underpaid as well as the late payment interest, and concurrently impose a fine of exceeding 50% but not exceeding five times of the amount of tax unpaid or underpaid.

 

(3) For any taxpayer who fails to pay or underpays the amount of taxes payable by means of forging, altering, concealing or destroying without authorization account books or vouchers for the accounts, or overstating expenses or omitting or understating incomes in account books, or refusing to file his tax returns after the taxation authorities have notified him to do so or filing   tax returns by fraud, then the taxpayer is a tax-evader. For any taxpayer who evades taxes, the taxation authorities shall recover the payment of taxes evaded and impose a penalty in the amount of 50% to five times of the amount of tax evaded. 

 

The announcement is hereby notified as above.

 

Hainan Local Taxation Bureau

January 27, 2014

 


 

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