People look at the sandbox model of a real estate project in Taiyuan, north China’s Shanxi Province, June 17, 2024. Photo: VCG

Shanghai further relaxed its real estate policy on Monday, eliminating the distinction between ordinary and non-ordinary housing and expanding tax incentives for real estate transactions, aiming to strengthen the real estate sector.

The move follows Wednesday’s announcement by the State Revenue Administration (STA) and other central government departments to adjust the tax structure on residential property transactions. The announcement clarified value-added tax and other incentives aligned with removing the classification of ordinary and non-ordinary housing.

Regarding personal income tax levies on real estate transactions, Shanghai announced that if individuals fail to provide complete and accurate proof of the original value of the property, or fail to provide an accurate calculation of the value original property and taxable amount, personal income tax will be assessed. based on relevant regulations issued by the STA, with a tax rate of 1 percent applied to income from home transactions.

In accordance with the above regulations, Shanghai has abolished the 2% initial tax rate on real estate transaction income for so-called non-ordinary real estate transfers. Other personal income tax policies remain unchanged, such as the personal income tax exemption on gains from the sale of property that served as a primary residence for more than five years and constitutes the family’s only accommodation.

Shanghai announced that individuals selling houses owned for more than two years (including two years) will be exempt from value added tax (VAT). For properties sold within two years of purchase, a full 5% VAT will be applied.

The city also adopted a unified national policy on personal property tax. For individuals purchasing their sole family home, a reduced rate of 1 per cent applies to homes of 140 square meters or less, while a reduced rate of 1.5 per cent applies to properties over 140 square meters.

For individuals purchasing a second home for their family, a reduced rate of 1% applies to properties of 140 square meters or less, while a reduced rate of 2% applies to properties of more than 140 square meters .

The regulation will come into force on December 1.

The revised personal income tax policy will provide significant tax relief, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Monday.

For example, a Shanghai homeowner selling a house valued at 10 million yuan ($1.38 million) previously had to pay 200,000 yuan in taxes, but now can only pay 100,000 yuan. Additionally, if the owner buys another property in Shanghai within a year, he or she can benefit from a tax refund policy, Yan said.

“Shanghai’s real estate policy has entered the most relaxed phase in its history. Since last year, the city has constantly optimized its land, financial and tax policies. These strong and far-reaching measures have effectively supported the release of demand for basic and renovation housing in the city,” Yan said.

The “golden window” for home purchasing has arrived, creating space for sustained demand for housing in Shanghai. Through positive policy adjustments on the supply and demand side, the supply-demand balance in Shanghai’s real estate market will improve, leading to more stable and healthy market development, Yan noted.

Following a series of pro-growth stimulus policies implemented by the government, real estate market activity has shown signs of recovery, with several indicators showing year-on-year growth in home sales lately.

In October, real estate transactions in China’s first-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – showed marked growth, with new home sales up 14.1% year-on-year and home sales of opportunity up 47.3%. data from the Ministry of Housing and Urban and Rural Development showed.

World Time