A real estate development enterprise obtains the land use right to develop and construct a real estate project, which may not be able to start or may be stalled for a number of reasons, and then the government will take back the land. According to the Urban Real Estate Management Law, urban land resumption can be categorized into compensated and uncompensated. As to whether enterprises need to pay land value-added tax when the government resumes the land with compensation and the land compensation is higher than the cost of land acquisition and development, the results of the current cases are different. This article will analyze whether land value-added tax should be levied under different circumstances when land is resumed by the government.

I. Introduction of Cases: The same idle land was resumed by the government, and the land value-added tax was levied and exempted.

(I) Case 1: Idle land was resumed by the government and the court held that land value-added tax should be imposed

In February 2014, X Land and Resources Bureau and Company A entered into the Contract for Granting the Right to Use State-owned Construction Land, granting Parcel X to Company A, which was granted the land for the construction of Project X. In December 2017, X Land and Resources Bureau made a Determination of Idle Land, stating that Parcel X was idle due to governmental reasons, and determining that the said land was idle land. in January 2018, X Land Acquisition Reserve Center and Company A entered into the State-owned Land Use Right Reservation Contract, which stipulated that Company A agreed to have the State-owned land use right of the aforesaid parcel of land collected and stored by X Land Acquisition and Reserve Center at a price of RMB 84.09 million.In September 2019, Branch Y of X Taxation Bureau made a Notice of Tax Matters, notifying that Company A should make up the non-residential land value-added tax of RMB 4.75 million for the project of X. Company A was notified that the land use right of the aforesaid parcel of land should be used for the purpose of the project.

Company A was not satisfied and filed administrative reconsideration and administrative litigation successively. The court held that Company A claimed that it met the exemption circumstances stipulated in Article 8(2) of the Provisional Regulations on Land Value Added Tax. However, the exemption of land value-added tax was applicable to the real estate that was "expropriated or recovered in accordance with law due to the need for national construction", and according to the national law on expropriation, the price of the land that needed to be expropriated or recovered for the need for national construction was determined by the expropriation authorities in accordance with the law in determining the compensation and resettlement program, and the price of such expropriation was not changed at the will of the expropriated person in general. The price of the expropriation is generally not changed by the will of the expropriated person. In January 2018, X Land Acquisition and Reserve Center and Company A signed the "State-owned Land Use Right Reservation Contract", agreeing that Company A agreed to store the state-owned land use right of the above parcel of land by X Land Acquisition and Reserve Center at a price of 84.09 million yuan, and that the price of the resumption of the land was based on the negotiation between the two sides "agreed", which is different from the price of state-owned land for national construction. The price of land resumption is based on the negotiation between the two parties "agreed", unlike the situation of national construction expropriation and resumption. Therefore, the existing evidence is insufficient to prove that the land in question was resumed, and the above circumstances of exemption can be applied.

(II) Case 2: Idle land was resumed by the government and the tax authorities considered that it should be exempted from land value-added tax.

Between 2006 and 2007, Company B and Z Municipal Bureau of Land and Resources signed the Contract for Grant of State-owned Land Use Right and Company B acquired the State-owned land use right of Lot Z. After Lot Z had basically reached the level of developable land, it was resumed by the government and the land use right of Lot Z was resumed by the government. After Parcel Z basically reached a developable state, Company B reported the construction plan to the W District Land and Resources Bureau twice, but the W District Land and Resources Bureau did not give a positive reply or approval, resulting in the land being idle.On September 1, 2010, Company B and the W District Land Reserve and Development Center of Z City entered into the "Contract for Acquisition of Parcel Z", which stipulated that: "The W District Land Reserve and Development Center will recover the state-owned land use rights of Parcel Z held by Company B." The contract also provided that the land use rights of Parcel Z will not be transferred to the W District Land and Resources Bureau. the state-owned land use right of Lot Z and pay a total of RMB640 million in land compensation to Company B. On September 13, 2017, the Inspection Bureau of the State Administration of Taxation of City Z served Company B with the Tax Treatment Decision, which determined that: Company B's failure to file tax returns on its income from the transfer of land use right for the year 2010 constituted tax evasion, and it was decided that Company B should make up for the payment of its corporate income tax for the year 2010 in the amount of RMB130 million. . As the land in question was resumed to fulfill the conditions for land value-added tax exemption, it was exempted from land value-added tax.

(III) Summary

In the above two cases, the same land was resumed by the government after being unused and the land compensation was obtained, but one of the cases concluded that the land VAT should be levied, while the other concluded that the land VAT should be exempted. What is more noteworthy is that the reason for the land being idle in both cases was "due to government reasons". The author believes that the reason behind the two cases, which are so similar, is that the national tax policy on land resumption and exemption from land value-added tax is not clear and perfect, which leads to different understandings in law enforcement practice as to whether a particular situation meets the conditions for exemption from land value-added tax. In this paper, we would like to analyze whether land value-added tax should be levied in various cases of land resumption by the government by comparing the linkage between the Urban Real Estate Management Law and the tax law.

II. Three types of land resumed by the government and their land value-added tax obligations

(I) Three types of land resumed by the government

According to Article 20 of the Urban Real Estate Management Law, "The State shall not recover the land use right legally acquired by a land user before the expiration of the service life agreed in the land grant contract; under special circumstances, in accordance with the needs of the public interest of the society, it may recover the right in advance in accordance with legal procedures, and according to the actual service life of the land user in using the land and the actual situation in developing the land, the land user shall be compensated accordingly. corresponding compensation." Article 22, paragraph 2, "If the term of use agreed upon in the contract for the granting of land use rights expires, and the land user has not applied for renewal of the land use rights, or if the land user has applied for renewal of the land use rights but has not been approved in accordance with the provisions of the preceding paragraph, the land use rights shall be resumed by the State without compensation." Article 26, "the land use right to obtain land use right for real estate development by way of grant ...... full two years without starting the development, the land use right can be withdrawn without compensation." It can be seen that the "Urban Real Estate Management Law" provides that the government to recover the land use right should include three cases:

First, because of the public interest needs, advance compensation for the recovery;

Second, the expiration of the transfer contract without compensation;

Third, because of the landowner's reasons for idleness, early recovery without compensation.

Urban Real Estate Management Law belongs to the land management law system, with the nature of administrative law, according to administrative law, "no authorization is prohibited" basic principle, in the absence of clear provisions of the law, the administrative organs shall not withdraw the right to use land. Therefore, the administrative organs to withdraw the right to use urban land has and only the above three cases.

(II) The land resumed by the government should be differentiated to determine the land value-added tax liability.

According to Article 8 of the Provisional Regulations on Land Value-added Tax, "Land value-added tax shall be exempted under one of the following circumstances: ...... (2) Real estate that is expropriated or resumed in accordance with law due to the needs of national construction." According to Paragraph 3 of Article 11 of the Provisional Regulations for the Implementation of the Provisional Regulations on Land Value-Added Tax, "Real estate expropriated or recovered in accordance with law due to the needs of national construction as referred to in Item (2) of Article 8 of the Regulations refers to the property or land use right that has been expropriated or recovered by the government with approval due to the needs of the urban implementation planning and national construction."

It can be seen that the Provisional Regulations on Land Value-added Tax uses the concept of "due to the needs of national construction", but does not provide a precise definition of this concept, which is difficult to verify from other sectoral laws, and can only be interpreted in conjunction with the Land Management Law. According to Article 1 of the Measures for Handling Idle Land, "These Measures are formulated in accordance with the Land Management Law of the People's Republic of China, the Urban Real Estate Management Law of the People's Republic of China, and relevant laws and administrative regulations for the purpose of effectively disposing of and making full use of idle land, standardizing the behavior of the land market, and promoting the conservation of land use." It can be seen that the Measures for Handling Idle Land is a subordinate law to the Land Administration Law and the Urban Real Estate Administration Law, and it cannot violate the provisions of the superior law by adding the situation of early recovery of land use rights. In the first case, the court in the reasoning part of the land was recovered "due to idleness" rather than "due to the national construction needs of the law requisition, recovery", so does not meet the conditions of tax exemption, but this juxtaposition does not actually exist.

In the author's opinion, the determination of idle land is a procedural work for policy purpose, and there is no direct connection between the procedure of determination of idle land and the result of early recovery of land, i.e., the idle land itself can not be directly derived from the result of early recovery of land use right. According to the aforementioned analysis, there are three kinds of cases in which the administrative organs can recover the land use right in advance, namely, recovering it with compensation due to the needs of public interests, recovering it without compensation when it expires, and recovering it without compensation when it is left idle due to the reasons of the landowner. After determining that the land is idle and needs to be recovered in advance, it must be further determined whether the reason for the land being idle is due to the need for idleness in the public interest or due to idleness for the reasons of the landowner, and then determine whether the early recovery of the right to use the land is due to the need for compensation for the public interest or due to the reasons of the landowner for the reasons of idleness and recovery without compensation. In the first case, the land was found to be idle for governmental reasons, and naturally, it did not belong to the situation of being idle for reasons of the landowner, but could only belong to the situation of being resumed with compensation for reasons of public interest.

From the viewpoint of the current legislation, it is not clear what the relationship is between "needs in the public interest" and "needs for urban implementation planning and national construction", but there is a great deal of crossover between the two. For example, if the land cannot be developed and constructed due to the adjustment of urban planning and is resumed by the government, the land is resumed due to the needs of public interest in the Land Management Law, and the land is also resumed due to urban implementation planning in the Land Value-added Tax Law. When the provisions of the tax law are not clear, for the consideration of the principle of protection of taxpayers' rights, the interpretation in favor of taxpayers should be adopted, and the situation of land resumption "due to the needs of public interests" should be interpreted as land resumption "due to the needs of urban implementation planning and national construction", and the land should be exempted from land value-added tax. The land value-added tax shall be exempted.

III. According to the principle of tax law, land resumed by the government does not belong to the scope of land value-added tax.

(I) The scope of land value-added tax is the transfer of real estate with compensation.

In the previous analysis, we have discussed the tax exemption conditions of land resumption in conjunction with the tax exemption provisions. However, if we stand at a more previous link - the taxation provisions, we believe that the current legislation can only conclude that land resumption is not subject to land value-added tax. To elaborate, according to Article 2 of the Provisional Regulations on Land Value-Added Tax, "Units and individuals who transfer state-owned land use rights, buildings and their attachments on the ground and obtain income are taxpayers of land value-added tax and shall pay land value-added tax in accordance with these regulations." According to Article 2 of the Implementing Rules of the Provisional Regulations on Land Value-Added Tax, "The transfer of state-owned land use rights, buildings and their attachments on the ground and obtaining income as referred to in Article 2 of the Regulations refers to the act of transferring real estate by sale or in other ways with compensation. It does not include the act of transferring real estate without compensation by way of inheritance or gift." It can be seen that the scope of land value-added tax is the transfer of real estate with compensation. Among them, "paid" and "transfer" are the necessary conditions for taxation, and one cannot be avoided without the other.

(II) The Land Administration Law provides a clear definition of the transfer and termination of land use right.

According to Article 19(1) of the Interim Regulations on the Grant and Transfer of Urban State-owned Land Use Rights, "Transfer of land use rights refers to the act of transferring land use rights by a land user, including sale, exchange and gift." Article 39, "The land use right is terminated due to the expiration of the use period stipulated in the land use right transfer contract, early repossession and loss of land." It can be seen that there are clear legal definitions for the transfer and extinguishment (termination) of land use rights.

Combined with the provisions of the above laws and regulations, it can be seen that: the transfer of land use right refers to the land user through the sale, exchange and gift of the land use right, the transfer of land use right is the effect of the land use right of the right to change the main body, but the land use right itself still exists. The extinction or termination of the land use right refers to the extinction of the land use right itself due to the expiration of the land use right grant contract, early repossession, or loss of the land. Therefore, the transfer and extinguishment of land use rights are two different legal concepts, and although both can cause the effect of a change in property rights, there is an essential difference in their content and nature, and the two should not be confused.

(III) The tax law should respect, recognize and inherit the definition of "transfer" in the Land Administration Law.

The Provisional Rules for the Implementation of the Provisional Regulations on Land Value-added Tax put forward the concept of paid transfer, but there is no specific definition of "transfer" in any relevant laws, regulations, rules and normative documents in China's land value-added tax system. Thus, the concept of transfer and the definition of its connotation and extension are concepts that do not need any special explanation in the land value-added tax system, and should be interpreted by directly adopting the provisions of other relevant sectoral laws and the definitions recognized and accepted by the general public, which are the same as its usual connotation and extension.

First of all, the Interim Regulations on the Grant and Transfer of Urban State-owned Land Use Rights define the transfer of land use rights. This regulation is part of the land administration law system, and its definition of the legal concepts involved in land administration is a legislative interpretation, entitled to interpretation, in line with the public's general understanding of the legal concepts, and belongs to the usual definition of the legal concepts.

Secondly, the tax law has the attribute of administrative law, which belongs to the same administrative law system as the land administration law. In order to maintain the consistency of the same legal concepts within the same legal system and avoid contradictions and conflicts in the application of the law, the tax law shall respect, recognize and inherit the definition of transfer in the land administration law. Except for the express provisions of the tax law, the connotation and extension of the legal concepts defined in the land administration law should not be changed arbitrarily.

Once again, clear tax elements is the basic connotation of the principle of tax law. On the one hand, the clarity of the elements of taxation requires that the concepts of tax law must be clear and unambiguous, and must not be inarticulate. On the other hand, it requires that the interpretation of the concept of tax law must have stability and cannot be expanded or narrowed arbitrarily. When there is no specific provision in the tax law, the interpretation of the concept of tax law in accordance with the same sectoral law is the basic requirement to guarantee the clarity of tax elements.

To sum up, the concept of "transfer" in the Implementing Rules of the Provisional Regulations on Land Value-added Tax should be interpreted in the same way as the concept of "transfer" in the Provisional Regulations on the Grant and Transfer of Urban State-owned Land Use Rights, i.e., it only includes the transfer of land use rights among different right subjects, and does not include the transfer of land use rights between different right subjects. That is to say, it only includes the transfer of land use rights between different subjects of rights, but not the extinction of land use rights.

(IV) According to the principle of statutory taxation, land resumed by the government should not be subject to land value-added tax.

According to the aforementioned analysis, the Provisions of the Implementation Rules of the Provisional Regulations on Land Value-added Tax on the Scope of Taxation adopt the legislative mode of positive description and negative enumeration, but this provision does not cover all types of changes in real estate property rights, which results in part of the behavior of changes in real estate property rights being in the "vacuum zone" of the legislation on land value-added tax. In detail, Article 2 of the Implementing Rules of the Provisional Regulations on Land Value-added Tax only stipulates that the transfer of real estate for compensation belongs to the scope of land value-added tax, and that the transfer of real estate for compensation in the form of inheritance and gift does not belong to the scope of land value-added tax, and the tax law does not stipulate whether or not the acts of setting up, changing or eliminating the property right of real estate for compensation and the acts of transferring real estate for compensation without constituting inheritance and gift should be taxed. The tax law does not provide for this.

According to Article 3 of the Tax Collection and Administration Law, "the levying and suspension of taxes, as well as tax reductions, tax exemptions, tax refunds, and tax supplements, shall be implemented in accordance with the provisions of the law; if the State Council is authorized by the law to make regulations, the regulations shall be implemented in accordance with the provisions of the administrative regulations formulated by the State Council. No organ, unit or individual may, in violation of the provisions of laws and administrative regulations, make decisions on the introduction or suspension of taxes, or on tax reductions, exemptions, refunds or compensatory taxes, or any other decisions that are in conflict with the laws and administrative regulations on taxation without authorization." It can be seen that the principle of tax law is the basic principle of tax law, and no tax shall be levied on the taxpayer without the express provisions of the law, and no taxpayer shall be required to pay back the tax. The resumption of land by the government belongs to the extinction of land use right and does not belong to the scope of land value-added tax.

Unfortunately, in practice, the tax authorities have different interpretations of the scope of taxation, either for policy considerations or economic considerations, and have expanded the interpretation of "transfer". In addition, according to the aforementioned interpretation, land resumption should be excluded from the scope of taxation, but the Provisional Regulations on Land Value-added Tax stipulate that land resumption is exempted from taxation if it meets certain conditions. According to the basic principles of tax law, non-taxation and exemption from taxation are different concepts, and therefore there is a contradiction and conflict within the current legislative system. We believe that the clarity of the tax law is an important value of the tax law, and the scope of land value-added tax exemption should be clarified by amending the law so as to build a harmonious and unified legal system of land value-added tax.