Legal analysis: compensation for factory demolition should be taxed. The compensation for house demolition obtained by the enterprise belongs to the extra-price expenses charged for the sale of land use rights, and should be included in the sales, and value-added tax should be levied together, but those who meet the conditions can enjoy the preferential treatment of value-added tax exemption. According to the law, the land value-added tax is exempted for real estate that is legally collected and recovered due to the needs of national construction. The enterprise shall, in the year when the relocation is completed, include the relocation income into the taxable income of the enterprise in that year to calculate the tax payment.

Legal basis: Article 8 of the Provisional Regulations on Land Value-added Tax in People's Republic of China (PRC) shall be exempted from land value-added tax under any of the following circumstances:

(a) taxpayers to build ordinary standard housing for sale, the value-added amount does not exceed 20% of the amount of the deduction;

(two) due to the needs of national construction, according to the law of real estate expropriation and recovery.