The Tax Dilemma And Suggestions On Chinese Real Estate Investment Trusts(Reits)

Real estate investment trusts (REITs) are universally recognized by the international community as one of the most effective real estate investing and financing tools. America is the forefront of developing real estate investment trusts, which has a very close relationship with its every tax reform. China’s real estate investment trusts started from2002, intensively issuing in year of2010and the first half of2011. Currently, on November28,2012, the Sichuan Trust released a trust program---the first phase of assembled funds trust plan of equity investment of Fuxing Shanglvwen Fund, which has drawn widespread attention because its expected return rate was over20%. However, under the current tax system, the real estate investment trusts in China are facing many problems----heavy tax burden, double taxation, the non-adaptability of traditional taxable elements, etc. So it is particularly important to establish a tax system which can encourage the development of real estate investment trusts. America’s taxation concepts such as "repaired trust conduit theory","not taxable of formal transfer","virtual taxation","conditional tax preferentials" well solved the trust double tax dilemma between trust companies and investors on trust benefits. They also relieve the tax burden of relevant parties, providing excellent tax law environment for the development of REITs. Absorbing the REITs’ tax system of America, China should combine with the reality of the development mode and stage of our REITs’, refer to the existing tax regulations of securities investment funds. In conclusion, we should make regulations avoiding double taxation in separate phases on different taxes such as business tax, income tax, stamp tax, deed tax, real estate tax, land value increment tax and so on.