mk North China's Shanxi Province, on June 17, 2024. Photo: VCG" src="https://www.globaltimes.cn/Portals/0/attachment/2024/2024-10-07/442ba965-0c67-403d-b2ce-1e10be2bfba6.jpeg" />

People view the sandbox model of a real estate project in Taiyuan, North China's Shanxi Province, on June 17, 2024. Photo: VCG

Shanghai on Monday further relaxed its real estate policies, eliminating the distinction between ordinary and non-ordinary housing and expanding tax incentives for property transactions, in an effort to bolster the property market.

The move followed Wednesday's announcement by the State Taxation Administration and other central government departments that the nation would adjust the tax structure on residential property transactions. 

The announcement clarified the value-added tax and other incentives aligned with the ending of the housing classification based on ordinary and non-ordinary status. Apartments larger than 144 square meters or those intended for commercial use are generally considered "non-ordinary".

Regarding personal income tax levies on home transactions, Shanghai has announced that if individuals fail to provide complete and accurate proof of the original value of the property, or provide an accurate calculation of the original property value and the taxable amount, then their personal income tax will be assessed based on the STA's relevant regulations with a rate of 1 percent applied to the value of the transaction.

In accordance with these regulations, Shanghai has abolished the original 2 percent tax rate on home transaction income for transfers of the so-called non-ordinary homes. 

Other personal income tax policies remain unchanged, such as the exemption from personal income tax on gains from the sale of a property that has been used as a primary residence for more than five years and is the family's only home.

Shanghai announced that individuals selling homes that were held for two or more years will be exempt from value-added tax (VAT). For properties sold within two years of purchase, the full VAT rate of 5 percent will be applied.

The city also adopted a unified nationwide policy on personal housing deed tax. For individuals purchasing their only family home, a reduced deed tax rate of 1 percent applies for homes of 140 square meters or smaller, while a reduced rate of 1.5 percent applies for properties larger than 140 square meters.

For those purchasing a second home for their family, a reduced deed tax rate of 1 percent will be levied for properties of 140 square meters or smaller, while a reduced rate of 2 percent will apply for properties larger than 140 square meters.

The regulations will take effect on December 1.

The revised personal income tax policy will offer significant tax relief, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Monday.

For example, a Shanghai homeowner selling a home valued at 10 million yuan ($1.38 million) would previously have had to pay 200,000 yuan in taxes but now may only pay 100,000 yuan. Additionally, if the homeowner buys another property in Shanghai within a year, they can benefit from a tax refund policy, Yan said.

"Shanghai's real estate policies have entered their most relaxed phase in history. Since last year, the city has steadily optimized policies regarding land, finance and taxation. These strong and far-reaching measures have effectively supported the release of both basic and upgrading housing demand in the city," Yan said.

The "golden window" for home-buying has arrived, creating room for a sustained demand for homes in Shanghai. With positive policy adjustments on both the supply and demand sides, the supply-demand balance in Shanghai's real estate market will improve, leading to a more stable and healthier market, Yan noted.

Following pro-growth stimulus policies announced by the government, property market activity has shown signs of a recovery, as several indicators show year-on-year growth of home sales.

In October, home transactions in first-tier cities - Beijing, Shanghai and Guangzhou and Shenzhen in South China's Guangdong Province - showed marked growth, with new home sales up by 14.1 percent year-on-year and secondhand home sales rising by 47.3 percent, data from Ministry of Housing and Urban-Rural Development showed.