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China developers told to reserve more cash for tax

BEIJING: China has ordered developers to put more funds on deposit to pay tax on sales revenues, a move that will add pressure to their cash flows, domestic media reported on Friday.

The government has not raised the final value-added tax, but has instructed real estate firms to set more money aside in advance to reflect expectations for higher capital gains on the back of surging property prices.

This will eat into developers' cash flow and force them to move sooner to cut property prices, Li Wenjie, a director with the Centaline Property agency, told the China
Business News
.

The General Administration of Taxation urged cities that are not collecting pre-tax deposits to start doing so, according to a statement on its website (www.chinatax.gov.cn).

It also told local tax bureaux to make examples of up to five developments with high or fast-rising prices by making sure that their owners pay the exact amount of the required tax.

These marked the latest in a series of incremental moves by the government to rein in the red-hot real estate sector. The index of property shares on the Shanghai Stock Exchange was up 0.1% at GMT 0317, in line with the broader market. -- Reuters
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