Property leasing

Value-added tax

(a) Natural persons

1. For natural persons leasing residential property, the tax payable is calculated at a reduced rate of 1.5 percent (down from 5 percent).

Tax payable = tax-inclusive income ÷(1+5 percent)×1.5 percent

2. For natural person leasing real estate property (excluding residences), the tax payable is calculated at a rate of 5 percent.

Tax payable = tax-inclusive income ÷(1+5 percent)×5 percent

(b) Privately or individually-owned businesses

1. For privately or individually-owned businesses leasing residential property, the tax payable is calculated at a reduced rate of 1.5 percent (down from 5 percent).

Tax payable = tax-inclusive income ÷(1+5 percent)×1.5 percent

2. For privately or individually-owned businesses leasing real estate (excluding residential property) eligible for a general tax approach, the tax payable is calculated at a rate of 10 percent; while for those eligible for a simple tax approach, the tax payable is calculated at a rate of 5 percent.

Property rate

For individuals leasing property, the lease income is taxed at a base property rate of 12 percent.

For individuals leasing residential property, the tax rate is 4 percent regardless of the property’s actual use or purpose .

For a taxable entity or individual using another entity’s property rent-free, they should withhold the property tax in line with the property’s residual value.

Individual income

The tax of rental income from leasing property shall be calculated at a tax rate of 20 percent under the category of “property leasing income” of individual income tax.

For individual income from leasing residential property at market rates, the individual income tax should be charged at the temporary reduced rate of 10 percent effective since January 1, 2001.

When calculating the individual income tax on property leasing, some costs should be deducted in advance in the following order:

1. Tax paid by the taxpayer in the process of leasing and contribution to the state key construction fund for energy and transportation, the national budget adjustment fund contribution, and extra charges for education funding, upon submission of tax records, can be deducted from the calculation of property leasing income tax.

2. Rental paid to the lessor.

3. Actual repair costs on the leased property borne by the taxpayer. The deductible repair cost is set at a limit of 800 yuan each time, while the un-deducted part can be deducted from the income upon the next repairs till the quota (800 yuan/time) is used.

4. Cost deduction standards stipulated by the tax law. If the property leasing income is less than 4,000 yuan each time, the taxable base should be reduced by 800 yuan. If higher than 4,000 yuan each time, it should be reduced by 20 percent of the total income. Individuals’ contributions to educational or charity causes are entitled to tax deductions in line with relevant stipulations of the State Council