China alert: Transfer Pricing Focus - Issue 5, July 2012
In the past decade, the real estate industry (the Industry) has become the focus of the State Administration of Tax (SAT) in relation to anti-avoidance. The industry itself has been named for nationwide tax specialised inspection and tax audit on numerous occasions. With increasing anti-avoidance experience and sophisticated technical knowledge, the SAT is paying attention to the Industry’s anti-avoidance. It is understood that the SAT will continue to focus on analysis of the Industry and order a nationwide anti-avoidance tax investigation in 2012.
In addition, local tax bureaus (LTBs) have also started to focus on anti- avoidance in the Industry. LTBs intend to expand the investigation scope from Corporate Income Tax (CIT) to real estate related taxations, including Land Appreciation Tax (LAT) and Business Tax (BT). LTBs had held a national anti- avoidance meeting in Shandong at the end of 2011. During the meeting, anti- avoidance issues of the Industry were discussed, and a work plan for anti- avoidance in the Industry was formulated. In the first half of 2012, the Shenzhen, Xiamen and Chengdu LTBs strengthened their anti-avoidance supervision and investigation of real estate enterprises.