Nov. 6 – The State Administration of Taxation clarified on October 27 how taxes are to be paid on transfers of state-owned land which has implications for foreign investors entering into joint ventures with SOEs or acquiring land from the state.

The “Reply on Clarifying the Basis of Deed Tax Calculations Imposed on Transfers of State-Owned Land Use Rights” states that all economic benefits paid by transferees in obtaining their state-owned land use rights are subject to taxable to deed tax.

Transferees who get their state-owned land use rights by bidding, auction, or public transfer need to pay deed tax based on the total price of their transfers. No land pre-development costs can be deducted from this.

For assistance with the tax implications of entering into a China joint venture or land acquisition in China, please contact Sabrina Zhang, the national tax partner for Dezan Shira & Associates, at tax@dezshira.com.

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