ad valorem and rent are two ways to levy property tax, and the main difference lies in the differences in tax basis and tax rate. The following is a detailed introduction:
The tax basis is different. Ad valorem levy is based on the original value of the property, usually deducting a certain proportion (such as 1% to 3%) to calculate the taxable amount; The ad valorem levy is based on the rental income of the property.
the tax rates are different. The ad valorem tax rate is usually 1.2%; The tax rate levied from rent is generally 12%, but it may be 4% in some areas.
These two methods have their own advantages and disadvantages, which are applicable to different real estate situations. Ad valorem taxation focuses more on the actual value of real estate, while ad valorem taxation focuses more on the profitability of real estate.
How to distinguish the ad valorem property tax
We can make a distinction according to the tax basis of the property tax, which is based on the residual value of the property and the rental income. These two situations are determined according to the different nature of the house.
according to the provisions of the tax law, there are two ways to calculate the property tax, namely, ad valorem and ad valorem. Let's take a closer look at the differences between the two methods:
1. Ad valorem
Ad valorem is based on the residual value after deducting 1%~3% from the original value of the property (the specific deduction ratio is determined by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government). The formula is:
Taxable amount = original value of taxable property ×(1- deduction ratio )×1.2%
Taxable amount = residual value of taxable property ×1.2%
2. Tax calculation from rent
Tax calculation basis:
(1) Rent income excluding value-added tax obtained from house rental is the tax calculation basis (including monetary income)
the calculation of rent is based on the rental income of real estate, and its formula is:
tax payable = rental income excluding value-added tax ×12%
enterprises, institutions, social organizations and other organizations calculate the rental income of housing rented to individuals for living at market prices, and its formula is: tax payable = rental income of real estate ×4%
In summary, it is an ad valorem calculation.
legal basis
article 3 of the provisional regulations of the people's Republic of China on property tax, the property tax shall be calculated and paid according to the residual value of the original value of the property after deducting 1% to 3% at a time. The specific reduction range shall be stipulated by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government.
if there is no original value of the property as the basis, it shall be verified by the local tax authorities with reference to similar properties.
if the property is rented, the property tax shall be based on the rental income of the property.
article 4 of the provisional regulations of the people's Republic of China on real estate tax, if the property tax is calculated and paid according to the residual value of the property, the tax rate is 1.2%; The tax rate is 12% if it is calculated and paid according to the rental income of real estate.