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Purchase a Property in China

Purchase a Property in China

Updated on Friday 10th April 2020

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Foreigners who want to purchase a property in China are no longer required to stay for at least one year in the country for work or study reasons, prior to being able to buy a house. Since 2015, foreigners can purchase as many properties as they want, and at the same time, the rule relating to the minimum living time in China has been abolished. Our lawyers in China can help foreigners throughout all the stages of the property purchase process, from the initial search to the drafting of the purchase agreements and the conclusion of the final purchase contract.
 

Who can purchase a property in China?

 
According to the Chinese Property Law, foreigners cannot buy land in China, as the land belongs to the state. Even if some limitations exist, foreigners who work in China or want to relocate here can purchase a property according to their needs and budget. 
 

Requirements for foreigners who want to buy properties in China

 
Although the general requirements have changed, rules may be different in various Chinese regions, like Shanghai, where it is possible to have additional requirements; in this sense, the foreign persons who want to purchase a property in Shanghai have to prove that they are married. The legislation applicable in Shanghai also states that a foreigner without a household registration is allowed to purchase only one property. The number of houses that can be purchased by a foreigner in China is no longer regulated to a maximum of one. A mandatory rule is that foreigners use the acquired property only for residential purposes and not for renting purposes or other activities. An important aspect is that the new legislation is available for Chinese mainland
 

How can foreign investors buy a property in China?

 
Foreign companies and foreign citizens who want to use a property for other needs than their own must firstly open a company in China. The following requirements need to be considered when wanting to buy a property in China:
 
  • foreign corporations which want to open branches or subsidiaries in China must provide relevant documentation that attests to their legal status;
  • a written guarantee that the purchased property will only be used for the needs of the company needs to be provided;
  • foreign investors with activities in China are now allowed to purchase a property designated as a housing unit;
  • foreigners must live in China for at least one year before purchasing a property.

 

Can natural persons buy properties in China?

 
Yes, individuals living in China can purchase houses in this country only if they make proof they have been living here for at least 12 months and paid the imposed taxes in the city they live.
 

The property purchase procedure in China

 
A person seeking to buy a property in China can search for an apartment with the help of a real estate agent or on their own; it is advisable to receive the legal assistance of a Chinese lawyer who is familiar with the local procedure. A preliminary purchase agreement is concluded with the seller and if the terms and conditions are agreed upon, the buyer must make a deposit, which is usually established at 1% of the value of the purchase. The final sale contract needs to be signed by both parties and notarized. Our Chinese lawyers can provide you with further information on the provisions of a purchase contract. Foreigners must also obtain a purchase approval from the local Foreign Office, a step which is absolutely necessary so that the government will recognize the purchase in all its rights. The transfer of ownership is performed under the surveillance of the Deed and Title Transferring Office, which will then issue an ownership certificate, testifying the new owner of the property
 
An important aspect for persons interested in purchasing a property in China is that foreign banks can offer various types of loans to foreigners. Real estate due diligence services can be offered by our attorneys so that you can make sure that the property bought is sold in good faith.
 

The costs related to property purchase in China

 
The notarized contract comprising information about the property purchase, the house insurance, the 0.5% transfer tax, the 7% construction tax, the property tax of 3%, and the notary fees are among the costs related to property purchase in China.
 

Property prices in China

 
The average house prices differ from city to city in China. Shanghai and Beijing are among the expensive cities in China, with approximately $ 9,200 per square meter. For Shenzhen and Guangzhou, the prices are much lower, and a property can be bought for around $ 6,000 per square meter.
 

Property due diligence in China

 
Before concluding any final purchase agreement, our Chinese lawyers can help the buyers with specific information on the property. The due diligence procedure for real estate properties in China includes the verification of the following issues:
 
- tenant information;
- operating/financial information;
- building information;
- any other relevant information.
 
The financial statements for the property will be thoroughly checked by our team to make sure that there are no mortgages on the house. The information on the building will target specific data, such as reports about the safety of the building, seismic risk, environmental reports or mechanical system reports. 

 

Real estate due diligence for investors 

 
Investors interested in carrying out business activities in China should perform a more complex due diligence procedure, which can include the following: 
 
verify if the market valuation of the building reflects its true prices;
a complete set of documents related to the ownership of the building;
specific lease terms;
legal guarantees prescribed by the law;
internal control. 


Property Sale in China – Taxes 

 
Selling a property in China may represent a challenge for the seller, in terms of taxes imposed by the Chinese legislation. Our law firm in China can represent your interests, according to the sale you are interested in, but as a client you should know that the following taxes may apply:
 
enterprise income tax – applicable for commercial property sale only. The seller must pay a rate of 25% of the enterprise income tax, applied to the profit on the sale, and a 5% business tax,
land value appreciation tax – applicable at the transfer of real properties and it can vary from 30% to 60% of the appreciation of the property (the increase in value gained by the asset over time). The tax is stated by the Guo Shui Fa Circular, applicable since May 2010. Our attorneys in China can provide you with legal documentation upon this Chinese law. 
deed tax – the tax is applicable to the buyer at the moment of the sale, and its value varies between 3% and 5% of the transfer value of the property, 
stamp duty – applicable at the changing of the title of the property.
 
Our law firm in China can help you submit all the necessary documentation and conclude the purchase agreement, so please do not hesitate to contact us.
 
 

 

Comments

  • May 2016-03-18

    I am interested in relocating to China and I'd like to buy a property here. I think I want to buy an apartment in Shanghai and later on my plans include opening a small company, but I haven't decided yet of the industry, as I want to find out which industries are the most important in this city.

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