Land value-added tax (VAT) is a kind of tax levied on units and individuals who transfer state-owned land use rights, buildings and their attachments on the ground within the territory of China, with the value-added gained from transferring real estate as the object of taxation.

The following three points should be noted when defining the taxable scope of land value-added tax:

1. Only the transfer of the right to use state-owned land (land owned by the state in accordance with the provisions of the law) falls within the scope of the land value-added tax, and collectively-owned land can only be transferred when it is converted to state-owned land after expropriation;

2. Only the transfer of real estate for a fee (the sale or transfer of real estate for a fee in other ways), and the transfer of real estate for a fee, are subject to the land value-added tax.

3. Only the paid transfer of real estate (meaning the sale or paid transfer in other ways) belongs to the scope of taxation, and the unpaid transfer of real estate, such as inheritance and gift, is not the object of land value-added tax. In addition, the transfer of state-owned land use right is also not the object of land value-added tax;

3. Buildings and their attachments on the ground refer to all buildings and structures built on the ground, all kinds of facilities above and below the ground, as well as plants, cultures and other articles attached to the land that cannot be moved and will be damaged once moved.

Value-added refers to the balance of the income derived from the transfer of real estate by the taxpayer, less the amount of the prescribed deductions. If a taxpayer has no balance after deducting the amount of prescribed deductions from the income from the transfer of real estate, he/she is not required to pay land value-added tax.

The formula for calculating the value-added amount is:

Value-added amount=income from the transfer of real estate one deduction item.

But if a taxpayer has one of the following circumstances, its land value-added tax shall be calculated and levied in accordance with the real estate appraisal price:

1. Concealment or misrepresentation of the real estate transaction price;

2. Provision of inaccurate amounts of deductions;

3. Transfer of real estate transaction price is lower than the real estate appraisal price, and there is no justifiable reason for it.

Article 8 of the Provisional Regulations on Urban Land Use Tax of the People's Republic of China*** and the State Land Use Tax is calculated annually and paid in installments. The period of payment shall be determined by the people's governments of provinces, autonomous regions and municipalities directly under the central government.