The Studies On The Income Tax Policy Of Real Estate Investment Trusts In China

As a composite product connecting the real estate industry and the financial industry,Real Estate Investment Trusts provide the new type of financing channel for the real estate market.On the other hand,the low risk and stable income make them the good investment tools for small and medium investors.Especially when real estate industry in China is facing the transformation of “light assets”,the development of the Real Estate Investment Trusts can not only revitalize huge stock assets,but also promote the industrial upgrading of the real estate industry in order to make a shift to a high-quality profit model.Then the high turnover model of “development and sale” have evolved into a service model with both one-time sale and continuous revenue gradually.However,due to the short time of launching Real Estate Investment Trusts in China,the relevant laws and regulations about structures are still not perfect,there is a certain gap with the forms of Real Estate Investment Trusts in the world.From the perspective of taxation,China's Real Estate Investment Trusts have many problems to be discussed in the income tax policy now.Firstly,in order to satisfy the legal form and accounting requirements,Real Estate Investment Trusts have the phenomenon of double taxation in income tax.Then,Diversification,especially the nesting of various financial instruments,makes the income tax status of the relevant participating entities unclear.Finally,the income tax of the entities is too high.This paper starts with the definition,characteristics,functions and types of Real Estate Investment Trusts,and clarifies that Real Estate Investment Trusts belong to the classification of generalized asset securitization,which has the characteristics of high liquidity,low risk and stable income.Then the international prosperity and development have led to the issuance of Real Estate Investment Trusts in China.Secondly,it discusses the applicability of income tax preferential treatment for Real Estate Investment Trusts.As a pipeline entity,Real Estate Investment Trusts have the “penetrating” taxation principle,which makes most countries and regions in the world exempt from unallocated income.However,the income tax preferential policy will bring about many problems such as the reduction of tax revenue,the unfair treatment of taxable entities and low efficiency.This paper proves the rationality of adopting income tax preferential policies from the aspects of tax revenue change,corporate income taxation target and preferential policies.Thirdly,the paper introduces and compares the income tax policies of the current REITs in China when they are during establishing,continuing,and paying dividends process.Then it analyzes the “Phase I of Asset Support Special Plan on Real Estate Leasing Housing by Zhonglian,Qianhai Kaiyuan and Poly”.This typical case finds that the tax-related entities of China's Real Estate Investment Trusts are complicated,the taxation costs are increased,the taxation status of some financial instruments is not clear,and there are repeated taxation.Forthly,according to different income tax preferential policies of some countries and regions,the paper does schematic calculations of the income tax burden of the participating entities,as well as the investor income under different dividend ratios and different tax liabilities.In the case of a more standardized structure,the income tax policy for Real Estate Investment Trusts in China should be optimized for different purposes,and the income tax incentives should be matched with the constraints of Real Estate Investment Trusts,such as dividend ratio and liability conditions.Finally,this paper proposes policy recommendations for improving the income tax of Real Estate Investment Trusts.They include clarifying the tax status of financial instruments,applying differential preferential policies for financier costs or investor returns,and designing policies that match the constraints of Real Estate Investment Trusts.