Editor's note: The complexity of the business of real estate development companies leads to a large number of tax risks This article intends to analyze the main tax risks related to value-added tax and corporate income tax in the development process of real estate development enterprises to remind enterprises.
1. Common tax problems of sales income
The entire period during which real estate development enterprises obtain sales income will involve the payment of value-added tax, land value-added tax, and corporate income tax. This article focuses on the common tax risks of corporate income tax and value-added tax of real estate development enterprises.
(1) Conceal sales income
Concealing various forms of sales income will affect the correct calculation of value-added tax and corporate income tax. The common situations of concealing sales income include: false sales area, false or incomplete sales area provided; commercial housing to repay debts, etc.
(2) Not to confirm income in time
Real estate development is based on the fact that the development project of the enterprise has been completed and started to sell. When the requirements are met, the income needs to be carried forward in time. Due to various reasons, there is often a problem that the advance payment cannot be carried forward in time.
(3) Not to declare and pay taxes in accordance with regulations on the charges outside the price, rent collected, and after-sales service fees
It is more common for non-price fees, rents collected, and after-sales service fees to not to declare taxes as required. For example, for the cable TV account opening fees, pipeline gas account opening fees, central heating and pipeline network construction fees that are collected along with the house price, companies have not declared value-added tax in accordance with regulations.
2. Common tax issues of costs
In the field of corporate income tax and value-added tax, accurate confirmation of costs is very important. Because the confirmation of costs affects the calculation of the company's pre-tax deduction of value-added tax and the calculation of the value-added input tax.
Common tax issues for costs include:
(1)Not to advance development costs as required
For construction and installation fees, public supporting facilities fees, etc., expenses can be accrued in accordance with relevant regulations. If development costs are not accrued in accordance with regulations, tax issues may arise.
(2) Costs are confirmed at the wrong time or not amortized in the prescribed manner
In real estate development projects, the time when the costs and expenses occur often does not match the time when the income is obtained. In order to adjust profits, some companies do not recognize the costs and expenses at the prescribed time to reduce the amount of corporate income tax.
(3) Concealing the building to increase the original design cost and deduct the costs that should not be deducted
There are two main situations to conceal a building, one is to design a building beyond planning, and the other is to expand the building area without authorization. Both of these will conceal the area of surveying and mapping. However, doing so usually leads to excessively high unit costs of the project. In fact, as long as the unit cost, design information and site conditions are carefully checked, the method of concealing the building is easy to be discovered.
(4) Falsified cost and expenses
Enterprises directly falsify costs and expenses through fictitious business, bills, etc., to underpay corporate income tax and value-added tax. This situation is a serious tax violation and may constitute an administrative violation or a criminal violation.
3. Common tax issues at the completion of the sale
At the completion of the sale, the tax authority generally checks the final corporate income tax of the company. At this time, the more common tax issues are:
(1) Improper handling of payables
Due to various reasons, when the sale is completed, the real estate development enterprise may not pay the payables. If these payments are not handled properly, it may cause the problem of underpayment of corporate income tax and over deduction of VAT input tax.
(2) Not to conduct corporate income tax screening and processing on the costs and expenses determined based on the land value-added tax liquidation
When the sales are completed and the land value-added tax is cleared, the development cost is determined. At this time, the previously estimated fixed asset cost needs to be adjusted, otherwise it will affect the calculation of corporate income tax. In addition, the cost and expenses confirmed by the land value-added tax need to be confirmed again in conjunction with the provisions of the Corporate Income Tax Law, otherwise it may bring risks due to improper handling.