In 2009, Chen Zhongxin purchased Room A525 of Golden Plaza on Haiti West Road, Sanya City from Hainan Jinghua Industrial Investment Co., Ltd. (hereinafter referred to as Jinghua Company). After Chen Zhongxin paid the house payment, he returned the A525 room to Hainan Jinghua Hotel Management Co., Ltd. (hereinafter referred to as Jinghua Hotel) under Jinghua Company. After the lease term expired from February 1, 2010 to January 31, 2013, Chen Zhongxin moved in and used it, but did not obtain a real estate certificate. On January 6, 2015, the Second Sanya Municipal Local Taxation Bureau assessed that Chen Zhongxin should pay a property tax of 4,104 yuan. After Chen Zhongxin paid the tax, he believed that Jinghua Company, not himself, was the actual user of the A525 room for rent, and applied to the Sanya Municipal Local Taxation Bureau of Hainan Province for administrative reconsideration. On March 10, 2015, the Sanya Municipal Local Taxation Bureau made a reconsideration decision to uphold the decision to levy property tax on Chen Zhongxin. Chen Zhongxin filed an administrative lawsuit, and the court of first instance held that after Chen Zhongxin obtained Room A525, renting out the house itself was an act of exercising the right to use the house. As the actual buyer of the house, Chen Zhongxin was the actual user of Room A525. Based on this fact, the tax authority determined that Chen Zhongxin was the taxpayer of the rental property tax, and the facts were clear, the application of the law was correct, and the procedure was legal, and should be supported. The judgment rejected Chen Zhongxin's claim.

  Chen Zhongxin refused to accept the first-instance judgment and appealed, arguing that the first-instance judgment ignored the issue of whether the appellant was the owner of the property rights. The property tax is paid by the owner of the property rights, and other taxpayers can become the tax subject only under specific conditions; it is contrary to common sense and has no legal basis or regulations to determine that the lessor is the actual user of the house. The appellee, the Second Sanya Municipal Local Taxation Bureau, believes that the administrative act has clear facts and correct application of the law, and the first-instance judgment should be upheld.

  The second-instance court held that: According to Articles 2 and 3 of the "Provisional Regulations of the People's Republic of China on Property Tax", property tax shall in principle be paid by the owner of the property rights. If the property rights are not determined, the property tax shall be paid by the property custodian or user. If the property is leased, the property tax shall be calculated based on the rental income of the property. Articles 12 and 14 of the "Interpretation and Provisional Regulations on Several Specific Issues Concerning Property Tax" (Cai Shui Di Zi (1986) No. 008) of the Ministry of Finance and the State Administration of Taxation stipulate that individuals who lease houses shall pay property tax based on the rental income of the houses. In this case, after Chen Zhongxin purchased Room A525, although the property rights of the house have not yet been transferred from Jinghua Company to his name, he has paid all the house payments in 2009, and Jinghua Company has actually delivered Room A525 to him for disposal and use, and there is no dispute over the actual ownership of the house. After Chen Zhongxin obtained Room A525, although he did not directly live in and use the house from February 1, 2010 to January 31, 2013, he leased the house to Jinghua Hotel and collected 88,350 yuan in rent, which is actually using the house in the form of leasing. The Second Sanya Municipal Local Taxation Bureau determined that he was the taxpayer of property tax and calculated and collected property tax based on the rental income he obtained, which complies with the aforementioned regulations.

  1. The owner of the property right is the general principle for property tax payers.

  Article 2 of the "Provisional Regulations of the People's Republic of China on Property Tax" stipulates that: Property tax shall be paid by the owner of the property rights. If the property rights belong to the whole people, the tax shall be paid by the unit that operates and manages the property. If the property rights are pawned, the tax shall be paid by the pawnee. If the owner of the property rights or the pawnee is not located in the place where the property is located, or if the property rights are not determined or the lease dispute is not resolved, the tax shall be paid by the property custodian or user. The owner of the property rights, the operating and management unit, the pawnee, the property custodian or the user listed in the preceding paragraph are collectively referred to as taxpayers.

   Property tax is generally paid by the owner of the property rights of houses within the scope of taxation. Specific taxpayers are only applicable when special circumstances occur. Specifically, first, when the property rights belong to the state, the operating and management unit is the taxpayer; second, when the property rights belong to the collective and individuals, the collective unit and individuals are the taxpayers; third, when the property rights are pawned, the pawnee pays the tax. The so-called property rights pawn refers to a financing business in which the owner of the property rights pawns the property rights of houses, means of production, etc. to others for use within a certain period of time in order to obtain funds. Since the owner of the property rights has no right to dispose of the house during the pawn period, the tax law stipulates that the pawnee who has the right to dispose of the house is the taxpayer; fourth, if the owner of the property rights or the pawnee is not located in the place where the house is located, the property tax shall be paid by the property custodian or user; fifth, if the property rights are not determined or the lease dispute is not resolved, the property tax shall be paid by the property custodian or user.

    2. Special provisions of tax documents on property tax payers.

   In 2017, the State Administration of Taxation issued the "Measures for the Formulation and Management of Tax Regulatory Documents", but before that, a large number of internal tax documents in the form of notices, approvals, and letters actually assumed the role of tax regulatory documents, and a large number of tax collection and payment behaviors in tax practice were based on these documents. In response to the special scope of application of the "user" as a taxpayer stipulated in the "Provisional Regulations on Property Tax", tax documents have evolved into concepts such as rent-free user, lessee, and actual user.

   Article 1 of the "Notice of the Ministry of Finance and the State Administration of Taxation on Issues Concerning Property Tax and Urban Land Use Tax" (Cai Shui [2009] No. 128) stipulates that taxable units and individuals who use the property of other units without rent shall pay property tax on behalf of the remaining value of the property. Article 3 stipulates that the property of financial leasing shall be paid by the lessee according to the remaining value of the property. The "Reply of the State Administration of Taxation on How to Determine the Property Taxpayer During the Period When the House Property Certificate Has Not Been Obtained" (Guo Shui Han [2002] No. 284) stipulates that where commercial houses are purchased and used in installments, the actual user of the house shall be determined as the property tax payer and pay property tax during the period when neither the buyer nor the seller has obtained the house property rights. The "Reply of the State Administration of Taxation on How to Levy Property Tax When the House Property Rights Are Not Determined" (Da Di Shui Yi Zhuan [1999] No. 16) stipulates that for houses sold by real estate development companies, they will no longer be recorded and accounted for in their accounting books, and if the unit purchasing the house has not obtained the property rights, the property tax may be paid by the user if the property rights are not determined.

  Although tax documents are more specific, targeted, and operational, the formulation procedures are less standardized than tax regulatory documents published in the form of announcements, and inconsistent expressions are prone to ambiguity, causing disputes between tax collection and payment parties. In addition, the tax authorities' use of tax documents to explain the legality of administrative acts is not only impossible for judicial organs to use as a basis for administrative adjudication, but taxpayers will also believe that the level of effectiveness is low and unconvincing.

    3. The user of the property tax should be determined based on the principle of being closest to the property owner.

    The taxpayer of property tax is the property owner in principle. Only when the property owner has no right to dispose of the property, the business manager, the pledgee, the agent and the user shall be the taxpayer. Throughout the tax normative documents and tax documents, although concepts such as rent-free users, tenants, and actual users have evolved, the corresponding property tax payers are ultimately the right holders who have the right to possess, use, and benefit from the property, and even dispose of the property within a certain limit.

  The term 'user' does not exist in the lease contract of Chapter 14 of the 'Civil Code'. There are only descriptions of the lessor, the lessee and the sublessee. Generally speaking, the lessor can freely dispose of the property regardless of whether he has obtained the property right, while the lessee's rights of possession, use and benefit are limited, and can only be implemented according to the lessor's intention during the contract period. From this perspective, the lessor is more in line with the concept of the user of property tax. But this is not absolute. I mentioned in the article 'How to deal with property tax when co-developing 'three-industry land'', after the village collective 'three-industry land' is leased, the lessee independently operates and leases the uncertified real estate. These decisions and benefits have nothing to do with the village collective, that is to say, the village collective as the lessor has no right to dispose of the relevant real estate within the contract period, so the lessee, as the actual user of the real estate, should pay property tax.

  In this case, both the tax authority and the people's court reviewed whether the appellant had the de facto rights of the property owner based on facts and evidence. Including whether the 'Commercial Housing Sales Contract' signed between Chen Zhongxin and Jinghua Company is valid, whether Chen Zhongxin has paid the purchase price, whether Jinghua Company has delivered the house, whether the house has been registered for pre-sale, whether there is any actual dispute over the ownership of the house, whether Chen Zhongxin delivered it to Jinghua Hotel for agency leasing after purchasing the house, and whether he received the rent. Based on the facts verified comprehensively, it is determined that the appellant belongs to the situation of using the house by means of leasing, and should pay property tax for the leased house.

   In summary, property tax should be levied on personal property used for leasing, regardless of its purpose. When there is a real estate registration certificate, the property owner is the taxpayer; when the real estate registration certificate is not obtained, the user is the taxpayer. The concepts of lessor and lessee in civil law and the concept of user in property tax cannot be simply corresponding, but it depends on who can actually freely possess, use and benefit from the property, and in fact enjoy the rental income of the property.

   Case: Chen Zhongxin v. the second instance of the tax collection and management dispute case of the Hexi District Local Taxation Bureau of Sanya City, Hainan Province

   Case No.: (2016) Qiong 02 Xing Zhong No. 12