By Victor Tu
As we know, when you set up a trading company in China, you have to find an office to rent as the working place. And today we will talk about the tax issues on this rental.
There are two situations for the office lease. The landlord is an individual or a business entity.
Technically speaking, when you rent an office, the landlord has the responsibility to pay the all taxes, however, in practice, the landlord will pass over the tax costs to the tenant and ask to notify the periodic payments are net amount (after taxes). So as the tenant must notice that and assess the actual lease costs on the contract.
Situation 1: the landlord is an individual
When the landlord is an individual, he or she has to pay the following taxes
l Individual Income tax 1%
l Real estate tax 4%
l Land use Tax 0.9%
l Stamp Duty 0.1%
Total 6%*
*these taxes are imposed by the local government, so the rate could vary from city to city.
For example, Ningbo Future toys Trading company is going to lease an office from Mr. Zhang for an office in downtown. And the monthly lease payment is RMB10, 000 (net. After tax). How do you calculate and assess the real costs?
In many cases, the company will do like this:
a. Wire transfer RMB10, 000 directly to Mr.zhang’s personal bank account without invoice. (No further action).
b. Or besides above action, some companies will go to the tax bureau to pay the taxes on behalf of landlord to get the invoice (amounting RMB10000) from the tax authority. Paying taxes RMB 600 (RMB10000*6%). And get the landlord’s tax payment certificate (amounting RMB600).
The above ways are not entirely following the tax rules, because Action A is Not-Get-The-Invoice. Action B, it is not allowed that a company pays the lease taxes directly for the landlord. So the correct way is set out as follows:
l Wire transfer the lease payment to the landlord
l the company and the landlord go to the tax bureau together with the landlord’s ID card copy and the lease contract
l Calculate the lease taxes (RMB10000/(1-6%)*6%=RMB1,212)
l Get the lease invoice from the tax bureau, amounting RMB11, 212.
l The tax allowable lease costs are RMB11, 212 for the Enterprise Income Tax
Situation 2: the landlord is a business entity
If the landlord is a company as well, it has to pay more taxes:
l Business tax 5%
l Urban Construction surcharge 5%*7%=0.35%
l Education fee surcharge 5%*3%=0.15%
l Local Education fee surcharge 5%*2%=0.1%
l Stamp duty 0.1%
l Water reservation fund 0.1%
l Real Estate tax 12%
l Land use tax RMB 15/m2 *
*the specific rate is based on the location, it will vary from urban to suburban.
If the landlord is going to pass over these tax costs to the tenant, the actual lease costs will increase around 35%.
To sum up, if you are looking for an office to lease, you’d better choose the landlord is an individual and make sure you could get the lease invoice from the tax bureau by calculating the right amount.
Keywords: Ningbo accounting, Ningbo Auditor, Ningbo accountants, Ningbo CPA
关键词：宁波会计，宁波审计，宁波会计师，宁波涉外会计，宁波注册会计师
Victor & Truman，CPAs 宁波纬度会计师事务所（普通合伙）
