Starting next year, individuals selling homes that have been owned for at least 2 years will be exempt from value-added tax.

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On December 30, the Ministry of Finance and the State Taxation Administration jointly issued the "Announcement on Value-Added Tax Policies for Individuals Selling Residential Housing", stating that individuals who sell houses held for more than 2 years will be exempt from VAT, while those held for less than 2 years will be subject to a 3% tax rate on the full amount.

The announcement points out that for individuals who sell residential housing purchased for less than 2 years, VAT will be paid in full at a 3% tax rate. For individuals who sell residential housing purchased for 2 years or more (including 2 years), VAT will be exempt. The policy applies to individuals and does not include general taxpayers among sole proprietors.

The new policy replaces Article 1, Section 5 of Annex 3 "Provisions on Transitional Policies for the Pilot Program of Replacing Business Tax with VAT" in the "Notice from the Ministry of Finance and the State Taxation Administration on the Full Implementation of the Pilot Program of Replacing Business Tax with VAT" (Cai Shui [2016] No.36), and this clause will cease to be implemented simultaneously starting January 1, 2026.

Regarding arrangements during the transition period, the announcement states that for VAT on individual home sales before January 1, 2026 that have not yet been declared or paid, if they meet the provisions of this announcement, they may be handled in accordance with this announcement.

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