China is the fourth-biggest country in terms of land area, only behind Russia, Canada, and the US.
The country stretches all the way from Kazakhstan to the East China Sea, having everything from desserts, jungles, snow-covered mountains, and vast grass fields.
Over the years, land prices have increased significantly in the bigger cities and since China’s industrialization took off.
Through tendering programs, the government has allocated land plots to large-sized developers and conglomerates to build everything from residential complexes to factories.
Investing in land can indeed be lucrative, but it’s also a challenging task due to complex ownership regulations.
In this article, we will review the basics of how you can profit from China’s real estate market and if it’s even possible to buy land. Let’s get started.
- Can foreigners buy land in China?
- Buying Land Through a Company
- Property Taxes
Can foreigners buy land in China?
Few Asian countries allow foreign land ownership and China is not an exception. Japan, Korea, Malaysia, and Taiwan are the only options available. Some people count Singapore, and you can actually buy land here.
Yet, they do require that you are a permanent resident, or make significant financial contributions, which is easier said than done.
As a foreigner, your only option is to lease land with a lease term of up to 70 years in China.
The country also has Land Use Rights (LUR), allowing you to build structures on the land leased, with an indefinite right of that structure.
Keep in mind that lease terms differ depending on the land type as well.
Different Lease Terms for Different Land Types
70 lease terms are valid for residential land. Commercial land, on the other hand, has lease terms of up to 40 years only.
The maximum lease term for industrial land is 50 years. Other land types have lease terms of up to 50 years.
Property ownership regulations can be a jungle in China, particularly for foreign investors who don’t speak mandarin.
As such, it’s recommended to work with partners that have boots on the ground and lengthy experience of land trading.
I recommend you also read the Property Law of the People’s Republic of China, which was issued in 2007.
The law stipulates regulations in greater detail and was issued as a measure to gradually develop a civil code for the country.
Buying Land Through a Company
If you want to buy commercial real estate or land in China, you must open a local company first. This is the baseline in most other Asian countries, including Vietnam, the Philippines, and Thailand.
In China, the most common options are to open a Wholly-Foreign-Owned-Enterprise (WFOE) or set up a Joint-Venture (JV) with a local Chinese partner.
The WFOEs aka real estate trading companies are typically owned by legal entities overseas such as in Singapore or Hong Kong, acting as parent companies.
Investing in land plots through companies isn’t necessarily a bad thing thanks to the limited liability, as well as reduced tax burden.
For more information, I recommend you contact a local law firm that specializes in foreign property investments.
Real Estate Taxes
Before you engage in China’s real estate market, you must get a good understanding of mandatory taxes. Regulations and tax rates continuously change as the country develops and the market changes.
Below you can find some of the most important taxes that buyers and owners should be aware of.
There’s no nationwide property tax yet, but the government has rolled out pilot projects in places like Chongqing and Shanghai in the past.
As late as 2021, the government had further talks to introduce a nationwide property tax, starting with Shenzhen and Hainan.
This would encourage local governments to issue more Land-Use-Rights (LURs), which can help to boost the economy with more investments in industrial buildings, as well as residential projects.
Shanghai has seen some of the highest price increases since the early 2000s. The government charged a property tax for persons not living in Shanghai and to local second-home buyers, who bought property above a certain size.
The property tax rate was 0.4% – 0.6% and multiplied by 70% of the original property value. In Chongqing, on the other hand, a tax rate of 0.5% – 1.2% was levied to the following categories:
- Landed houses in the major 9 districts
- Properties costing more than 2 times the city’s average price
A Business Tax (BT) of 5% is charged towards sellers of properties and Land-Use-Rights (LURs). If the seller is the first developer of the land, the tax is multiplied by the gross selling price.
For subsequent sellers, the tax is merely multiplied by the price appreciation.
If a foreign company transfers properties or Land-Use-Rights (LURs) without having a Chinese company, the Business Tax should be withheld by the purchaser and paid to the government.
For more information, I recommend you read this comprehensive guide written by Deloitte.
In addition to the above-mentioned taxes, various other taxes exist in China.
Examples include the so-called farmland occupation tax, urban land-use tax, land value-added tax, deed tax, corporate income tax, personal income tax, and stamp duty.
For more information and up-to-date information about the latest rates, I suggest you contact a local lawyer. You can also write a comment at the end of this article, or contact us directly via email.
Below I have included some commonly asked questions and our replies. If there’s anything else you wonder about, feel free to write a comment below or contact us by email.
Can foreigners own freehold property in China?
No, foreigners aren’t allowed to own real estate on a freehold basis in China. This includes everything from residential units to industrial property and land, for example.
Instead, we can lease land plots with leasehold terms that stretch from 40 to 70 years.
Can U.S. citizens own property in China?
U.S. citizens can own property under the same conditions as most other Western countries.
If you want to buy residential property, you typically have to live in China for at least 1 year. You also have to use the unit for self-dwelling purposes, you cannot rent it out.
The buying regulations are comparatively strict, both for locals and foreigners. These are protective measures, but also to cool down the market, which has exploded in the past two decades.