China Extends Tax Incentives to Stabilize Market Expectations

The Chinese Ministry of Finance, in collaboration with other relevant departments, has issued a series of announcements on August 25, further extending a batch of tax incentives in various sectors, including real estate and non-performing debt disposal. These measures aim to bolster market stability and mitigate financial risks.

Supporting Housing Upgrades: To continue supporting citizens in improving their housing conditions, the Ministry of Finance, the State Taxation Administration, and the Ministry of Housing and Urban-Rural Development jointly issued an announcement outlining tax policies related to supporting the purchase of new homes. From January 1, 2024, to December 31, 2025, individuals who sell their self-owned residences and repurchase a home within one year after the sale will receive tax refund benefits. If the cost of the new home is equal to or greater than the sale price of the old residence, the entire personal income tax paid for the sale of the old residence will be refunded. If the cost is less, a proportional refund will be granted based on the ratio of the new home’s cost to the old residence’s sale price.

Promoting Public Rental Housing: To continue supporting public rental housing construction and operations, the Ministry of Finance and the State Taxation Administration introduced seven tax-related incentives in their announcement. These include exemptions from urban land use taxes during the construction and occupancy phases of public rental housing, exemptions from stamp duty for public rental housing management entities, and exemptions from stamp duty for rental agreements.

Enhancing Non-Performing Debt Disposal: To strengthen the disposal of non-performing debt and mitigate financial risks, the Ministry of Finance and the State Taxation Administration issued an announcement regarding tax policies for banks and financial asset management companies. This policy allows such institutions to apply a 9% value-added tax rate when disposing of real estate assets to offset debt, and exempts these institutions from stamp duty on contracts and property transfer documents during the debt asset acceptance and disposal processes.

These measures collectively reflect the Chinese government’s commitment to maintaining economic stability, supporting housing initiatives, and managing financial risks through targeted tax policies.