Research On The Tax Law Of Land Value-added Tax For Real Estate Investment Trusts (REITs

The real estate in China has transitioned from the incremental era to the stock era.Developing REITs is conducive to revitalizing the stock assets of real estate,stabilizing the real estate market,promoting the transformation of the real estate industry from emphasizing assets to neglecting assets,increasing direct financing and reducing financial system risks.Compared with the international REITs market,there is no tax system and preferential policies specifically for REITs products in China at present,which leads to a higher overall tax burden of REITs and affects the investment return rate of REITs.Therefore,it is one of the factors restricting the development of REITs in China at present.In this paper,normative analysis,comparative study,literature research and case study are used to analyze the Land Appreciation Tax burden of REITs.Referring to the relevant tax laws and regulations of REITs in other countries,it makes a substantive analysis of REITs trading activities and seeks solutions to the problems starting from the basic principles in the tax legal system.Chapter 1 puts forward the core problems encountered in the development of REITs in China at present.First,in terms of legal framework,there is no special and systematic legal framework for REITs in China.What’s more,there are the following problems in the applicable laws of REITs:(1)The existing laws and regulations do not fully cover the applicable subjects and product structure forms of REITs.For example,the Notice of the National Development and Reform Commission and the CSRC on Promoting the Pilot Work of Real Estate Investment Trust Funds(REITs)in the Infrastructure Sector(hereinafter referred to as the Pilot Notice)and the Guidelines for Public Offering of Infrastructure Securities Investment Funds(Trial)and the Guidelines for Funds(Trial)of the CSRC regulate that commercial real estate is not included.It is not applicable to other product structures other than "public funds + infrastructure asset-backed securities";(2)There are no special guidelines for REITs in other professional supporting aspects,such as asset appraisal and accounting.Second,there is no special tax policy concerning REITs in China’s current tax law.The tax-related matters in the whole process of REITs are implemented according to the existing tax regulations,and the tax burden is heavy,which affects the rate of return of REITs and restricts the development of REITs.Third,The Land Appreciation Tax system lacks tax support for REITs.According to the existing the Land Appreciation Tax regulations,the reorganization of real estate in the establishment period and the disposal of real estate in the exit stage are taxable matters of Land Appreciation Tax,which need to be levied progressively according to the overrate of 30-60% of the value-added amount when transferring real estate.As a result,Land Appreciation Tax in REITs process has repeated tax burden and heavy tax burden.Chapter 2 and 3 mainly analyze the Land Appreciation Tax related to REITs.First of all,from the perspective of Material Imposition Principle,we look at the special purpose of asset restructuring during the establishment of REITs.1.When REITs were established,the original owner transferred the basic assets to the project company according to the asset securitization business management regulations,which was an asset reorganization,not a daily business activity.The reasons were:(1)The purpose of this behavior was to enhance credit through structured means,which was a financing behavior;(2)It is a necessary arrangement in the process of establishing REITs,which shows that the basic assets,as the financing tools of the original owners through REITs products,are not daily business activities;2.Loading basic assets into the project company is not a general sale;(1)For the original owner,whether it is the legal requirements of strategic placement and long-term locking,or from the perspective of project operation and management arrangements,there is also the risk transfer of basic assets,and the transfer of basic assets by the original owner is not a general sale.(2)For REITs public investors,the purpose of investing in REITs products is to share the special plan income by holding fund shares,not to control the project company.They do not have the professional ability to participate in the operation and management of basic assets.There is also the problem of repeated tax burden of Land Appreciation Tax in the process of REITs.From the time when REITs were established,the basic assets were subject to Land Appreciation Tax when the original owner loaded the basic assets into the project company;When REITs withdraw from liquidation,the project company pays Land Appreciation Tax again when transferring basic assets,and the original owners and ordinary investors bear repeated tax burden on Land Appreciation Tax.Chapter 4 puts forward the suggestions from two aspects: The construction of REITs legal framework and tax law: In the aspect of legal framework construction,the development of RETELS is of great significance to the current economy and long-term development.It is suggested to establish special and systematic legal norms for REITs,including clearly defining,standardizing and guiding REITs project subject qualification,product structure,fund raising,project operation management,governance framework and investor protection,profit distribution,tax policy,transaction behavior norms,asset evaluation,accounting,etc.In terms of tax laws,first,it is suggested to improve relevant tax laws and policies for REITs in order to reduce the tax burden of REITs and protect tax sources comparing the characteristics of tax neutrality and tax preference drive in mature markets of REITs in the world;Second,following the Material Imposition Principle,it is suggested that Land Appreciation Tax should be taxed in the final sale of real estate by the original owner to avoid repeated tax burden;Third,it is suggested that the original rights holders enjoy the same preferential policies of Land Appreciation Tax as asset restructuring.Because the original owner transfers the basic assets to the project company,it is an asset transaction outside the daily business activities,and not for the purpose of tax avoidance.Finally,it puts forward some proposals for REITs the Land Appreciation Tax: 1)Establish REITs qualification standards,and enjoy the same preferential tax policies for those who meet the qualification standards and transfer basic assets at the time of establishment in line with the essence of asset restructuring;(2)Record and manage REITs products,establish management files for established REITs,and conduct qualification examination for REITs projects every year.Projects whose examination results meet the conditions of REITs tax policy continue to enjoy corresponding tax policy treatment;(3)The REITs project manager shall examine and declare the tax qualification of REITs projects every year,and the intermediary agency shall issue a verification report;(4)When REITs withdraw from liquidation and dispose of basic assets,if the original owner buys back the basic assets,Land Appreciation Tax will be exempted and deferred until the final sale of the basic assets,or Land Appreciation Tax paid from the first collection to the final sale will be adopted for liquidation,allowing deduction of the paid Land Appreciation Tax;(5)Establish penalties.For enterprises that do not meet REITs qualification standards and evade paying Land Appreciation Tax in the name of asset restructuring,they will recover Land Appreciation Tax and late payment fees in accordance with tax collection and management regulations,and impose fines.