What to know about tax when providing free housing to workers?

ABOUT

VAT

01

Don’t need to be regarded as

sales

"Measures for the Implementation of the Pilot Reform of Business Tax to VAT" (Finance and Taxation [2016] No. 36) provides that: the sale of services, intangible assets or immovable property refers to the paid provision of services, the paid transfer of intangible assets or immovable property, except for the following non-business activities: (3) units or individual industrial and commercial households provide services to employed employees.

The accommodation provided by the company to its employees is a non-business activity and does not need to pay VAT.

02

Whether the input can be

deducted

According to Article 27 of the Notice of the Ministry of Finance and the State Administration of Taxation on Comprehensively Promoting the Pilot project of replacing Business Tax with value-added Tax (Finance and Taxation [2016] No. 36), the input tax of the following items shall not be deducted from the output tax :(1) The purchased goods, processing and repair of goods used for simple tax calculation methods, VAT exemption projects, collective welfare or personal consumption Services, services, intangible assets and real estate. The fixed assets, intangible assets and immovable property mentioned herein refer only to the fixed assets, intangible assets (excluding other equity intangible assets) and immovable property dedicated to the above projects.

Case 1:

The enterprise provides free dormitory for employees, which belongs to the scope of providing benefits for employees. If the rental housing funded by the enterprise is used for free in the employee dormitory, the input tax obtained by the invoice shall not be deducted.

Case 2:

If the enterprise owned housing is used for employee accommodation, the input tax shall not be deducted.

However, it is necessary to pay attention to the restrictions of the words "dedicated to" in the above provisions, if the enterprise changes the office building part of the staff dormitory, not "dedicated to" collective welfare can be deducted input tax.

ABOUT

Corporate Income Tax

According to the Notice of the State Administration of Taxation on the deduction of enterprise wages and salaries and employee welfare expenses (State Tax Letter (2009) No. 3), Article 3 (1) of the enterprise employee welfare expenses include the following: The equipment, facilities and personnel expenses incurred by the welfare department of the enterprise that has not yet implemented the separation of social functions, including the staff canteen, the staff bathroom, and the haircut Expenses for equipment, facilities and maintenance of collective welfare departments such as offices, medical clinics, nurseries and sanatoriums, as well as wages and salaries, social insurance premiums, housing provident funds and labor expenses of staff of welfare departments.

Enterprises to provide employees with free dormitory is a welfare expenditure, not more than 14% of the total wage before the enterprise income tax deduction.

Case 1:

If the rental housing funded by the enterprise is used for staff dormitory free of charge, the compliance bill shall be obtained.

Case 2:

If the house belongs to the enterprise and is used for the staff dormitory, the depreciation expense shall be calculated through the staff welfare expense, and the expenses related to the construction or purchase of fixed assets shall also obtain the compliance bill.

ABOUT

Individual Income Tax

Reference to the tax policy interpretation of the Income Tax Department of the State Administration of Taxation in the third quarter of 2018: At present, individual income tax is not levied on non-cash benefits that are enjoyed collectively, indivisible and not quantified to individuals. Therefore, whether enterprises pay personal income tax for providing free dormitories for employees should be mastered with reference to the above document caliber.

If it is a separate house provided free of charge to senior executives, personal income tax will be calculated.

ABOUT

Property Tax

Provisional Regulations of the People's Republic of China on Property Tax: The property tax shall be paid by the owner of the property right. If the property rights are owned by the whole people, they shall be paid by the operating and administrative units. If the title is issued, it shall be paid by the mortgagee. If the property right owner or undertaker is not located in the real estate, or the property right is not determined and the lease dispute is not resolved, the real estate escrow or user shall pay.

Property tax is calculated and paid according to the remaining value of the original value of the property after a one-time reduction of 10% to 30%. The specific reduction rate shall be prescribed by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government. The tax rate of the property tax, calculated according to the residual value of the property, is 1.2%.

Case 1:

If the property is owned by the company, or the property is used without rent, the property tax needs to be paid.

Case 2:

If you rent the property of other units and individuals, there is no property rights or rent disputes, you do not need to pay real estate tax.

If you need any more information, feel free to contact SOLUTIONS. We will be glad to assist you.

SOLUTIONS

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