Tax relief for home buyers still uncertain

PUBLISHED : Wednesday, 29 October, 2003, 12:00am
UPDATED : Wednesday, 29 October, 2003, 12:00am

No timetable has been seen for the introduction of proposed measures by the Shanghai government to give homeowners tax relief on their mortgages.

'Originally, Shanghai planned to introduce this on October 1, but it has been pushed back,' said a foreign banker.

'Such a measure has to be approved by Beijing, and the delay may be due to arguments over who will lose tax revenue. If it is only Shanghai that loses revenue, Beijing is likely to agree,' he said.

Officials declined to comment. The policy would allow mortgage holders to offset the amount they pay in interest against personal income tax.

For example, if a home-buyer is paying a monthly mortgage of 10,000 yuan (about HK$9,400) of which 7,000 yuan pays the interest and 3,000 yuan pays the principal, he can claim a deduction of 7,000 yuan on his income tax bill.

Industry experts said the proposed measure was less generous than a previous policy that gave mortgage holders full tax refunds. That policy expired in May.

The policy, introduced in the late 1990s when the property market was in the doldrums, prompted many people, both Chinese and foreigners, to buy property.

The government lost income tax but gained on the taxes associated with house purchases.

New Choice Mortgage Services director Joseph Zimny said rumours of the new measure had circulated for a long time but there had been no official confirmation.

'The government ... wants to support homeowners as one of the most stable forces in society,'' he said.

'Property owners are responsible, pay taxes and invest in the community.'