According to the Announcement, when enterprises/entrepreneurs invest in a government land-transformation project (i.e., corporate relocation, demolition of dilapidated buildings, land leveling or land consolidation), if the plot of land complies with the state requirements on land transfer, the local government will list it for transfer. If the transaction price is lower than the investment made by the entity/entrepreneur, it alone will bear the losses. If the transaction price is higher than the investment, the entity/entrepreneur will be entitled to all the proceeds.

In this process, the entity’s/entrepreneur’s activities are considered investment activities falling beyond the scope of business tax, meaning business tax is not applicable to these investment proceeds.

However, income that planning & design, and construction entities obtain from their services related to the land-transformation project is subject to business tax under the applicable regulations.

Date of issue: April 15, 2013. Effective date: May 1, 2013.