Editor's Note: Recently, the State Taxation Administration Xinjiang Uygur Autonomous Region Tax Bureau issued the Announcement on Clarifying Issues Related to Land Value-Added Tax (2025 No. 2), which clearly stipulates core issues such as the land value-added tax liquidation unit, the time for collecting revenue and costs, and the method for allocating costs and expenses, responding to many disputes in practice. Previously, Xinjiang implemented the Announcement on Clarifying Issues Related to Land Value-Added Tax (2016 No. 6). The new regulation comes nine years after the old one, and the changes deserve close attention from real estate development enterprises. Combining with the practice of land value-added tax collection and management, the author selects seven key points in the new regulation for interpretation, for readers' reference.

 

01 Key Point 1: Clarifying the Liquidation Unit and Adding the Project Reporting Time

The land value-added tax liquidation unit is the basic premise for carrying out liquidation work. From the national level, the relevant regulations have certain ambiguity. Article 8 of the Detailed Rules for the Implementation of the Interim Regulations on Land Value-Added Tax stipulates that "land value-added tax shall be calculated on the basis of the most basic accounting items or objects for the accounting of taxpayers' real estate costs". Article 1 of the Notice on Issues Concerning the Administration of Land Value-Added Tax Liquidation for Real Estate Development Enterprises (Guoshuifa 〔2006〕 No. 187) points out that "land value-added tax shall be liquidated on the basis of real estate development projects approved by relevant national departments; for projects developed in phases, liquidation shall be carried out on the basis of phased projects". Due to the relatively general provisions on liquidation units at the national level, the implementation standards for division vary across regions, involving multiple bases such as land use right certificates, project approval documents from the National Development and Reform Commission, construction planning permits, and construction land permits.

Specifically in Xinjiang, the 2016 No. 6 Announcement had relatively flexible provisions on liquidation units, taking real estate development projects (phased projects) approved and filed by relevant national departments (mainly planning departments, combined with relevant materials from the National Development and Reform Commission and construction departments) as units, and allowing taxpayers with long development cycles to divide phases independently and file for record with the competent tax authority. Although this method considered the complexity of projects, in practice, it required integrating materials from multiple departments, which easily led to disputes due to information connection problems or the flexibility of enterprises' independent phasing. The 2025 No. 2 Announcement adjusts this, clearly taking the real estate development project confirmed by the Construction Engineering Planning Permit issued by relevant government departments as the liquidation unit. This adjustment simplifies the judgment basis, reduces the space for discretionary decisions, and this change may have a significant impact on the tax burden of enterprise projects. However, the interpretation supplementarily explains that if there are special reasons requiring adjustment, taxpayers can file an application, and after confirmation by the industry competent department, the competent tax authority will study and confirm, reserving operational space for special circumstances. At the same time, the new regulation adds project reporting requirements: taxpayers shall go through the land value-added tax project reporting formalities with the competent tax authority at the project location within 30 days from the date of obtaining the construction project construction permit.

It is worth noting that although the 2025 No. 2 Announcement strengthens certainty by adopting a single standard, it lacks flexibility and fails to fully consider the actual situation of special projects. In this regard, reference can be made to Article 7 of the Measures for the Administration of Land Value-Added Tax Liquidation of the State Taxation Administration Shandong Provincial Tax Bureau (State Taxation Administration Shandong Provincial Tax Bureau Announcement 2022 No. 10), which stipulates that "land value-added tax shall be liquidated on the basis of the real estate development project confirmed by the Construction Engineering Planning Permit issued by the government planning department; for real estate development projects planned and constructed within 24 consecutive months, the relevant real estate development projects confirmed by the Construction Engineering Planning Permit can be merged into one unit for liquidation".

02 Key Point 2: Clarifying the Frequency and Deadline for Prepayment Declaration

Land value-added tax for real estate development enterprises adopts the mode of prepayment first and liquidation later. The Xinjiang 2025 No. 2 Announcement refines the prepayment rules, providing clearer guidance for enterprises' practical operations. Specifically:

First, clarify the starting point of prepayment, which is the date when the taxpayer obtains the first Commercial Housing Pre-sale Permit or the existing house sale record certificate. This enables enterprises to clearly identify the node where the prepayment tax obligation arises, avoiding tax disputes caused by unclear starting time.

Second, fix the declaration frequency, requiring monthly prepayment for different types of real estate. Nationwide, there are differences in the frequency of land value-added tax prepayment across regions: Jiangsu, Guangdong and other provinces require monthly declaration; Anhui and other regions implement quarterly prepayment; Shandong allows real estate development enterprises to independently choose monthly or quarterly prepayment. For Xinjiang enterprises, after the new regulation takes effect, they need to adjust the declaration rhythm in a timely manner, and accurately prepay monthly by distinguishing property types to avoid the risk of overdue.

Third, define the deadline, which is the end of the previous tax period for prepayment when the tax authority accepts the liquidation declaration. How to understand this deadline? For example, a project obtained the first Commercial Housing Pre-sale Permit in January and started to prepay land value-added tax. It met the liquidation conditions in June. According to Article 11 of the Administrative Rules for Land Value-Added Tax Liquidation (Guoshuifa 〔2009〕 No. 91), the enterprise shall go through liquidation procedures with the competent tax authority within 90 days from the date of meeting the conditions. If the tax authority accepts the enterprise's liquidation declaration on August 20, since prepayment is made monthly, the previous tax period is July, so the prepayment deadline is July 31. It should be noted that during the preparation stage of liquidation declaration, enterprises still need to complete the current prepayment declaration simultaneously, which requires the financial department to do a good job in data connection.

In addition, the new regulation clearly stipulates that the basis for calculating land value-added tax prepayment = prepayments or sales revenue ÷ (1 + applicable VAT rate or levy rate).

03 Key Point 3: Clarifying the Collection Time of Liquidation Revenue

In land value-added tax liquidation, there are no clear national regulations on the collection time of revenue and sales area, and implementation varies across regions. The Xinjiang 2025 No. 2 Announcement clarifies this, which is positive for reducing disputes between tax collectors and payers and is worthy of recognition. According to the new regulation, the revenue collection time is consistent with the deadline of the tax period for the aforementioned prepayment declaration, both being the end of the previous tax period for prepayment when the tax authority accepts the taxpayer's liquidation declaration.

However, in practice, there are some issues that enterprises need to focus on regarding this regulation. Taking the aforementioned case as an example, revenue collection is cut off on July 31, but during the period from June when the enterprise starts preparing liquidation materials to this deadline, sales activities may still occur or revenue data may be adjusted. Enterprises need to complete the calculation of land value-added tax related materials, fill in the liquidation form, provide accurate tax payment data, and at the same time be based on the final revenue and sales area data. This gives enterprises a choice: whether to suspend sales to ensure data stability or continue sales? If they choose to continue sales, data will continue to change; if they suspend sales to ensure accurate and stable data, it may affect the normal operation rhythm of the project.

Therefore, enterprises should coordinate sales plans and liquidation preparations in advance, and reasonably plan sales nodes in combination with their own operation rhythm. For large transactions around this stage, they need to pay special attention to the impact of data changes on liquidation results, avoiding tax risks caused by deviations in the application of rules.

04 Key Point 4: Clarifying the Collection Time of Liquidation Deduction Items

Although the Interim Regulations on Land Value-Added Tax and its implementing rules at the national level list the scope of deduction items, including the amount paid for obtaining land use rights, real estate development costs, development expenses, etc., they do not stipulate the collection deadline for these items, and implementation standards vary across regions. Compared with previous policies, the Xinjiang 2025 No. 2 Announcement clearly states that the occurrence time of deduction items should, in principle, not be later than the completion acceptance record of the liquidation project, providing a specific basis for cost collection. Previously, the draft for comments in Xinjiang did not have the flexible space of "in principle"; although the current regulation leaves room, the definition of exceptional circumstances is still unclear.

How to understand the completion acceptance record of the liquidation project? According to Article 49 of the Regulations on the Administration of Construction Project Quality, "the construction unit shall, within 15 days from the date of passing the construction project completion acceptance, submit the construction project completion acceptance report and the approval documents or permission for use documents issued by the planning, public security fire control, environmental protection and other departments to the construction administrative department or other relevant departments for record". This link marks the basic completion of the project construction stage. Linking the cost collection time to this node can reflect the correspondence between costs and the development stage, but may deviate due to practical problems such as project delays and long settlement cycles. For example, project funds completed before the completion record but without obtaining invoices, and expenses for finishing works or after-sales maintenance incurred after the record. If they are excluded from the deduction scope only due to the time node, it is not in line with the principle of matching costs and revenues, and will also increase the tax burden on enterprises.

Comparing policies in other provinces and cities, the handling methods are more flexible and diverse. Beijing (Administrative Rules for Land Value-Added Tax Liquidation of Beijing Local Taxation Bureau, Article 16) and Xiamen (Measures for the Administration of Land Value-Added Tax Liquidation in Xiamen, Article 17) allow enterprises to independently choose any day within 90 days from the date of meeting the liquidation conditions or within 90 days from the date of receiving the liquidation notice from the competent tax authority as the deadline for confirming liquidation revenue and collecting deduction item amounts, facilitating enterprises to flexibly plan according to the progress of project payment and invoice acquisition. Anhui (Measures for the Administration of Land Value-Added Tax Liquidation in Anhui Province, Article 26) and Hainan (Work Rules for Land Value-Added Tax Liquidation of the State Taxation Administration Hainan Provincial Tax Bureau, Article 17) take the date of liquidation declaration as the deadline for liquidation revenue and collection of deduction items. Among them, Anhui also stipulates (Measures for the Administration of Land Value-Added Tax Liquidation in Anhui Province, Article 52) that if legal certificates not obtained before are obtained within three years after liquidation, a secondary adjustment can be applied for with the approval of the tax authority. Guangxi (Measures for the Administration of Land Value-Added Tax on Real Estate Development Projects in Guangxi Zhuang Autonomous Region (Trial), Article 40) allows the deduction of quality deposits for which invoices are obtained after completion. Guangzhou (Notice of Guangzhou Local Taxation Bureau on Issuing the Guidance on Handling Several Issues in Land Value-Added Tax Liquidation [2012 Revised Edition], Article 7) allows extending the deadline for payment of deduction item amounts, but the payment must be completed before the end of liquidation review; otherwise, it will not be deducted. These practices are more in line with the actual characteristics of real estate projects, such as long settlement cycles and delayed expenditures.

For Xinjiang enterprises, implementing the new regulation requires sorting out project costs in advance, completing major project settlements before the completion record, clarifying the invoice issuance time through supplementary agreements, and avoiding the impact of delayed certificates on deductions. At the same time, they should pay attention to necessary expenditures incurred after the record, retain relevant materials such as supplier contracts, and actively communicate with the competent tax authority to strive for inclusion in exceptional circumstances.

05 Key Point 5: Clarifying the Method for Allocating Costs and Expenses

In land value-added tax liquidation, the method for allocating deduction items refers to the method for allocating common costs and expenses among different liquidation units or different types of real estate when real estate development enterprises obtain an overall plot for phased development or develop multiple projects simultaneously, or construct different types of real estate in the same project. Common allocation methods include: floor area method (including proportion of total building area, saleable building area, sold building area, internal floor area, floor area ratio, etc.), land area method (proportion of land use certificate area, construction land planning permit area, etc.), direct cost method, storey height coefficient method, etc. The choice of these methods directly affects the deduction amount of each liquidation unit, which in turn is related to the appreciation amount, appreciation rate and final tax burden.

The Xinjiang 2025 No. 2 Announcement no longer separately mentions the adjustment of construction and installation engineering fees for residential and commercial buildings according to the storey height coefficient, but uniformly stipulates that the following rules "shall be followed": for "the amount paid for obtaining land use rights" and "land expropriation and demolition compensation fees" among common costs and expenses between different liquidation units, allocation shall be calculated according to the occupied land area; other common costs and expenses shall be allocated according to the saleable building area. Common costs and expenses for different types of real estate in the same liquidation unit shall be allocated according to the saleable building area. This provision is more rigid than the national policy. According to Article 21 (5) of the Administrative Rules for Land Value-Added Tax Liquidation (Guoshuifa 〔2009〕 No. 91), "if a taxpayer develops projects in phases, develops multiple projects simultaneously, or constructs different types of real estate in the same project, he shall adopt a reasonable allocation method to allocate common costs and expenses according to the benefit objects". It can be seen that the national level does not limit to a single method, but allows other reasonable methods under the benefit principle. Therefore, compared with rigidly applying local regulations, it is more reasonable and necessary to confirm whether the cost and expense allocation method adopted by the taxpayer conforms to the benefit principle.

06 Key Point 6: Provisions on Public Facilities, Civil Air Defense Facilities and Other Underground Facilities

The Xinjiang 2025 No. 2 Announcement specifies the land value-added tax treatment of public facilities, civil air defense facilities and other underground facilities through Articles 9, 10 and 11, as follows:

Public facilities mainly include buildings for neighborhood committees and police stations, clubs, parking lots (garages), property management premises, substations, heat stations, water plants, cultural and sports venues, schools, kindergartens, nurseries, hospitals, postal and telecommunications facilities supporting the liquidation project. The new Xinjiang regulation clarifies that if the property right of such facilities is owned by all owners, or they are gratuitously transferred to the government or public institutions for non-profit social public undertakings, their costs and expenses can be deducted; if they are transferred for consideration, income shall be calculated and costs and expenses shall be allowed to be deducted. This framework is consistent with Article 4 (3) of Guoshuifa 〔2006〕 No. 187. On this basis, Xinjiang further lists five identified situations of "owned by all owners", including provisions in government documents, registration or record in the real estate registration system, indication in the commercial housing sales contract filed with the housing and urban-rural development department, etc. The interpretation also clarifies that "transfer for consideration" shall go through the transfer of real property rights in accordance with the Civil Code and collect a reasonable consideration. However, disputes still exist in practice. For example, some public facilities cannot obtain property rights due to objective reasons, but are sold in the form of permanent use rights or limited property rights. Whether such transactions can apply to the rules for transfer for consideration, and whether the corresponding costs and expenses can be deducted.

For civil air defense facilities, the new Xinjiang regulation is more clear than previous provisions: if they are constructed in accordance with the law and pass acceptance, and are received by the administrative competent department, gratuitously transferred to the government or public institutions for non-profit undertakings, or actually occupied, used or benefited by all owners (owners' committee), the construction expenses can be deducted; if they are not constructed but the civil air defense construction fees are paid and certificates are obtained, the fees can be deducted. However, if the right to use parking spaces converted from civil air defense facilities is transferred or they are used for self-use, no income shall be recognized during liquidation, no costs and expenses shall be deducted, and the amount paid for obtaining land use rights shall not be allocated. The interpretation clarifies that passing acceptance is based on obtaining the Civil Air Defense Project Acceptance Certificate. In practice, the civil air defense department mostly only accepts but does not receive jointly built civil air defense facilities, and the government rarely receives them directly. Therefore, according to the new Xinjiang regulation, if enterprises want to deduct the corresponding costs and expenses, they usually need to submit proof materials that all owners (owners' committee) actually occupy, use or benefit from them. Considering that it is difficult for new projects to establish an owners' committee in the short term, the interpretation clarifies that if the owners' committee is not established, the property management company can handle the reception and use management on its behalf.

Regarding other underground facilities, the new Xinjiang regulation defines them as facilities developed and constructed using underground space except civil air defense projects, such as storage rooms and garages. The land value-added tax treatment rules are divided based on the way of ownership transfer. If the ownership is transferred, income shall be recognized in accordance with regulations, and corresponding costs and expenses shall be deducted and the amount paid for obtaining land use rights shall be allocated; if only the right to use is transferred or they are used for self-use, they shall not be included in the liquidation scope, no income shall be recognized, and there shall be no cost deduction or land cost allocation.

Overall, after the new regulation takes effect, detailed provisions have been made for the above-mentioned public facilities, civil air defense facilities and other situations, which provide clearer operational guidance for liquidation work, but also put forward higher requirements for enterprises' material management, objectively increasing the cost for enterprises to collect and sort out relevant materials. In this regard, enterprises need to pay attention to the retention of various certification materials, such as ownership certificates, transfer documents, acceptance certificates, etc., to ensure that they can provide timely and complete evidence during liquidation, avoiding the impact on cost deduction or disputes due to incomplete materials.

07 Key Point 7: Clarifying the Time Scope of Application of the Announcement

The Xinjiang 2025 No. 2 Announcement clearly stipulates that "this Announcement shall come into force on the date of issuance. For projects for which the tax authority has not issued a liquidation review conclusion before the implementation of this Announcement, this Announcement shall apply; for those for which a liquidation review conclusion has been issued, no adjustment shall be made". This rule defines the time effect scope of the new regulation, but may cause disputes over retroactivity in practice. For example, if a project received a liquidation notice from the tax authority before the issuance of the Announcement, such as on May 1, the enterprise prepared materials in accordance with the old 2016 No. 6 Announcement and submitted the liquidation declaration on July 1, and the tax authority accepted it on the same day. Since no review conclusion has been issued at this time, it will be required to re-adjust the data in accordance with the new 2025 No. 2 Announcement. This situation where enterprises prepare declaration materials in accordance with the old regulation and the tax bureau reviews in accordance with the new regulation may cause enterprises to bear additional tax burdens due to policy connection issues, which conflicts with the principle of "no retroactivity of laws" and is not conducive to maintaining taxpayers' reasonable expectations.

From a reasonable perspective, for projects that have entered the liquidation process but have not issued conclusions before the implementation of the Announcement, it is more appropriate to give taxpayers the right to choose, i.e., allowing them to independently choose to apply the new regulation or the original liquidation provisions. For example, Article 42 of the Measures for the Administration of Land Value-Added Tax Liquidation of Real Estate Development Projects by the State Taxation Administration Qingdao Tax Bureau stipulates that "these Measures shall come into force on September 21, 2022. Real estate projects for which the competent tax authority accepts liquidation declaration materials on or after the date of issuance of these Measures shall be implemented in accordance with these Measures. For real estate development projects for which the competent tax authority has accepted liquidation declaration materials before the date of issuance of these Measures and for which no liquidation review conclusion has been issued before September 21, 2022, they may be implemented in accordance with the original liquidation provisions or these Measures".

 

Conclusion: Given the significant regional differences in land value-added tax policies nationwide, real estate development enterprises should not only deeply interpret and strictly follow the specific regulations of the project location, but also establish a cross-regional policy tracking mechanism to dynamically grasp the trend of policy adjustments in various regions. Especially under the background that the new regulation has stricter requirements on material management, enterprises need to strengthen the awareness of retaining materials throughout the project life cycle. When necessary, they can rely on professional tax lawyers to build a systematic policy interpretation and risk prevention and control system, ensuring reasonable control of tax burden under the premise of compliance.