The executive meeting of the State Council held on June 18 proposed that from October 1st, housing leasing companies will apply the simplified taxation method for renting houses to individuals, and pay value-added tax at a rate of 5% minus 1.5%. The industry believes that this is the first time that a systematic and comprehensive tax reduction policy has been proposed for leasing companies.
Premier Li Keqiang of the State Council presided over an executive meeting of the State Council on June 18 to determine the policy of accelerating the development of affordable rental housing and alleviating the housing difficulties of groups such as new citizens and young people. It mentioned: “Encourage the participation of market forces” “Allow idle and inefficient use of commercial office buildings, factories, etc. to be converted into affordable rental housing.”
In particular, since October and January this year, enterprises and public institutions have rented out houses to leasing companies, and leasing companies have rented out houses to individuals, with greater tax cuts. In the eyes of industry insiders, this is the first systematic and comprehensive tax reduction policy proposed for leasing companies.
The State Council executive meeting held on June 18 made it clear that the supply of small-sized affordable rental housing with rents below the market level should be increased.Picture source: Screenshot of China Government Network
In order to guarantee the basic housing needs of new citizens and young people in the process of urbanization, the meeting clarified that it is to implement the main responsibility of the city government, encourage the participation of market forces, strengthen financial support, and increase the supply of small-sized affordable rental housing with rents below the market level. .
The supply of rental housing for new citizens and young people has always been an urgent market demand. According to Li Yujia, the chief researcher of the Guangdong Housing Policy Research Center, in the process of urbanization, new citizens and young people such as migrant workers and newly employed college students have a strong demand for decent and experiential housing. But at present, the problems of high housing prices and high rents in big cities are very prominent. The supply of stock rental housing is not efficient. It is either large-sized, located in urban villages, or the leasing order is relatively poor. This hinders the release of new housing demand, and is also one of the main reasons why these people find it difficult to settle down in the city.
Huang Hui, a senior analyst at the Shell Research Institute, also said that at present, the main market supply is a two-bedroom apartment with 60-90 square meters and a rent of more than 3,000 yuan. The leasing demand of new citizens and young people is mainly based on small apartments and low rents. This group of people faces the problem of poor housing conditions and difficulty in finding suitable housing. However, through the power of the market, the scale of affordable rental housing can be expanded more efficiently, and new citizens and young people can live and work in peace in the city.
In Li Yujia’s view, encouraging market participation means that the supply and operation of affordable rental housing are mainly promoted by market-oriented enterprises. This is the biggest difference between affordable rental housing and public rental housing. In other words, affordable rental housing is a quasi-public welfare housing product, and it must be supported by government policies, planning, and inclusive finance to achieve a market-oriented capital balance.
It is worth mentioning that the meeting also determined that in large cities with a net influx of population, collective operating construction land and enterprises and institutions’ own land can be used to build affordable rental housing, allowing idle and inefficient commercial use Office buildings, factories, etc. are converted into affordable rental housing.
In this regard, Yan Yuejin, research director of the Think Tank Center of the E-House Research Institute, believes that this has enabled the idle housing to be truly revitalized. For example, the docking of idle commercial office projects with affordable rental housing is a very good innovation. This will facilitate the destocking of commercial properties of some real estate companies.
In addition, Huang Hui said that this practice of revitalizing idle housing is conducive to solving the problem of job-living balance.
Who will benefit from the substantial reduction in value-added tax and real estate tax?
In the eyes of many industry insiders, the biggest highlight of this meeting is tax cuts. The meeting proposed that from October 1st, housing leasing companies will apply the simple tax calculation method for renting houses to individuals, and pay the value-added tax at a 5% collection rate reduced by 1.5%; for enterprises and institutions, private and specialized large-scale housing leasing For companies renting out houses, real estate tax will be levied at a reduced rate of 4%.
Huang Hui said that the housing leasing industry has a relatively narrow profit margin, and tax reduction can ease the operating pressure of housing leasing companies, increase corporate profit margins, and help increase the enthusiasm of companies to participate in the leasing market.
In terms of value-added tax, Yan Yuejin said that in the past there was a reduction and exemption policy for individual landlords’ value-added tax. In March 2016, the State Administration of Taxation issued the “Interim Measures for the Administration of the Collection of Value-Added Taxes on Real Estate Operating Lease Services Provided by Taxpayers”, which mentioned that individual industrial and commercial households should pay 1.5% of value-added tax on rental housing. In June of the same year, the “Several Opinions of the General Office of the State Council on Accelerating the Cultivation and Development of the Housing Rental Market” clarified that the value-added tax shall be calculated and paid at the rate of 5% minus 1.5% for individual rental housing.
In contrast, there are fewer regulations on the reduction and exemption policies for enterprises, but the proposed leasing company this time also reduces the value-added tax for renting houses to individuals by 1.5%.
In terms of real estate tax, Yan Yuejin introduced that the real estate tax mentioned here is two different things from the real estate tax paid by an individual holding a house. Here is the real estate tax for operating rental business.
The change this time is that entity companies rent vacant houses to leasing companies, which can reduce the property tax. In layman’s terms, that is, “public-to-public” housing trusteeship or rental behavior, real estate tax can be reduced. In the past, the property tax rate in this case was 12%, and currently it is levied at 4%.
The real estate tax for companies renting out houses to individuals has long been reduced by 4%. In 2008, the “Notice of the Ministry of Finance and the State Administration of Taxation on Tax Policies for Low-Rent Housing Economically Suitable Housing and Housing Leasing” clarified that enterprises, public institutions, social groups and other organizations will lease housing for individuals to individuals at market prices. Real estate tax is levied at a reduced rate of 4%.
Tax cuts promote the release of housing and long-term rental apartment operations
From the perspective of industry insiders, driven by the reduction of real estate tax, entity companies that hold properties such as commercial, office, residential, and serviced apartments can be mobilized to proactively provide affordable rental housing. Among them, Huang Hui said that lowering the corporate property tax for rented houses can encourage enterprises and institutions to use idle houses for rent, on the one hand to solve the problem of employee housing, on the other hand to increase effective rental housing.
In the face of this tax cut, Yan Yuejin believes that this is a strong support for these leasing companies. As the tax burden on long-term rental apartments decreases, the direction of operation becomes clearer.
As we all know, in recent years, long-term rental apartments and market-oriented leasing companies have been facing operating pressure, especially the frequent “thunderstorms” of long-term rental apartments have cast a shadow on the large-scale development of the industry. At the same time, companies’ appeals for lower tax burdens and cost reductions are also very strong.
On the whole, Yan Yuejin said that this is the first systematic and comprehensive tax reduction policy proposed by the state for leasing companies. In the past, tax reduction policies were more embodied in low-rent housing or renting from individuals, but this time it is obviously alleviating the operating pressure of leasing companies. The expected burden reduction effect is obvious, which will create a better business environment for leasing companies.
Li Yujia said that from the current point of view, the state has relatively strong policy support for the development of low-cost, guaranteed rental housing. This is of great significance for advancing new urbanization, diverting the demand for housing purchases, and building a new housing system featuring both rent and purchase and rent-and-buy.
Beijing News reporter Yuan Xiuli
Edited by Wu Xin to proofread Lucy Return to Sohu to see more
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