Higher tax for realty firms from VAT
Print Edition
PROPERTY developers expect to pay higher tax after they move from business tax to value-added tax late this year, PricewaterhouseCoopers said yesterday.
More than half of the respondents said their tax may rise slightly and another 35 percent expect a significant increase, according to a survey covering 20 large and medium-sized property developers nationwide.
Unlike the business tax, which is levied on the total revenue of a company, VAT assesses only increments of new value created by a company. Under VAT, certain costs of purchasing goods and services can be deducted.
PwC said that if developers can’t deduct expenses on purchasing land from the government, the VAT they pay could rise 40 percent from the current business tax assuming that land purchasing accounts for 40 percent of the total costs of a developer.
The developers may also have trouble claiming tax refund on materials such as sand and bricks because they are bought from individual or small firms who can’t issue VAT invoices.
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