Do homeowners in China pay property taxes?
Some time back in a Quora Forum I had asked: "Do homeowners in China pay property taxes?"
I had heard that that China has a heart for their populace and doe snot bleed all their wealth by onerous crippling property taxes like is done many states in the United States. When I first heard that Chinese citizens don't pay property taxes, I did not believe it and needed to investigate.
The tax burden on the average citizen homeowner in the United States is enormous. With Federal taxes, state taxes, property taxes, gas tax and tax on almost everything many feel financially crippled.
Doug Casey, founder of Casey Research in an article wrote: Take an American and a Chinese, each with a dollar. Say both are equally smart and hardworking, and each is able to double his dollar every year2, 4, 8, 16 The only difference is that the American pays 35% in taxes and the Chinese pays nothing. Actually the American is paying close to 50% and the Chinese is paying something, but the difference is about the same. With only that differential, by the time the American has one million dollars, how much does the Chinese have? The answer is that by the time the American has a million dollars in 28 years, the Chinese has 268 million.
Doug further goes on to say: And then, when the American dies, the government will take half of his piddling million dollars for estate taxes, so his kids start with no meaningful financial capital. And probably minimal intellectual capital, if the obvious dummying down of American schools has anything to do with it. Meanwhile, the scions of the Chinese will have an untaxed $268 million, and probably a much better education and stronger work ethic to help them deploy it.
In my search for truth, I was fortunate enough to have found an American living in China. That answer came back from a knowledgeable firsthand source, a Phd engineer who lives in Beijing China for almost 20 years, Chris Garcia.
This was his answer to my question: "Do homeowners in China pay property taxes?"
Not really, said Chris.
Currently the only taxes are a sales tax when you sell your house, but even that is always passed on to the buyer. There is also a tax on the increased value of the property since you initially purchased it, but that can be often avoided. If not, it is passed on to the buyer.
There is experimentation in certain municipalities with an annual property tax. If adapted, it is supposed to replace the high taxes the real estate developer pays with they initially obtain use of the land. Many people will be exempt from the property tax scheme if implemented.
People talk about only being able to keep your property for 70 years. You can always ignore these people. They don't know what they are talking about. Under the old policy, most urban residential property was granted 70 years of use rights. This 70 years ran from the moment the government released the land to the real estate developer. Developers rarely started construction until at least a few years later and then the construction projects lasted another couple of years. Generally when the house was first bought, the initial owner had only about 63 years left. For commercial real estate the use rights were for 50 years.
A while ago the central government announced that residential real estate owners could keep their property indefinitely. The government would not be taking anybody's property from them. That said, the property still had to meet current housing code, but then that's to be expected. If the housing estate was not up to code, owners would be required to bring it up to code. Or they could sell it. Given the high cost of land itself, it's unlikely selling it would result in a financial loss. And keeping the unit up to code is not that difficult. That should be done anyhow and that's why all homeowners already pay annual property management and maintenance fees just like people in the US pay condo association fees.
Before You Come To A Hasty Conclusion, Read Chris's Further Reply (his answer after I sent him Doug Casey's assessment)
Casey, though, is a bit off. While there are no property taxes at present in China, there is a capital gains tax upon sale. Avoiding it, though, is not terribly difficult. That said, there is one gigantic hidden tax and that is built into the cost of the property itself. When the developer obtains the land from the government, they pay an extremely huge tax that basically equates to 50% of the ultimate sale price of each unit. For example, let's say you bought a house for $100,000, 1/2 that money was ultimately to reimburse the developer of the land tax paid when they acquired the land.
In Beijing, a new 100m2 apartment located at least 1 hour with the wind at your back from the center of the city will cost you at least $1,000,000, 1/2 of which represents the tax the land developer paid. In Orange County I can buy two 200m2 houses houses, not apartments for that money, but I will get hit about 1% a year for property taxes.
In the US, property taxes get you free K-12 education for your kids. In Beijing, although they say education is free, that's really a lie. There's $80 per month for a crappy lunch, about $500 per term for books and incidental costs, plus transportation to school and home, $300 per year for school uniforms not to mention money for remedial classes when the teacher with 50 kids in the class doesn't have the time or ability to give kids even semi-individualized attention.
As for income tax, the Chinese income tax rate comes out even higher than the US. There is also sales tax and gasoline tax in China, but it is built into the price so not transparent.
Casey is further confused on estate taxes. $5.49 million is tax exempt in the US. If you have more than that, there are methods for leaving the money and avoiding taxes. Still, the first $5.49 million is tax free.
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Most homeowners and business are too stressed by day-to-day demands to see if they are over-charged with their property tax assessment. They may think they're paying too much, but don't pull the trigger. They go about their affairs helpless, often unaware they are being victimized by the tax assessor.
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