1. Legal basis (1) Notice of State Taxation Administration of The People's Republic of China on issues related to the collection of value-added tax and business tax on auction income obtained by auction houses (Guo Shui Fa [1999] No.4) (2). Notice of State Taxation Administration of The People's Republic of China on Issues Concerning Strengthening and Regulating the Collection of Individual Income Tax for Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) (III) Notice of State Taxation Administration of The People's Republic of China on Printing and Distributing Provisions on Several Issues Concerning the Collection of Individual Income Tax (Guo Shui Fa [1994] No.89) (IV) Notice of Ministry of Finance State Taxation Administration of The People's Republic of China on Including Railway Transportation and Postal Industry in the Pilot Project of Changing Business Tax to VAT (Caishui [213] No.16) Annex 3: Provisions on the Transitional Policy of Changing Business Tax to VAT Pilot Project
II. Tax-related Treatment of Auction Calligraphy and Painting (I) Treatment of Value-added Tax and Business Tax "Notice of State Taxation Administration of The People's Republic of China on Relevant Issues Concerning the Collection of Value-added Tax on Auction Income Obtained by Auction Houses" (Guo Shui Fa [1999] No.4) stipulates that, 1. All the price and extra-price expenses charged by the auction house to the buyer for the auction of VAT taxable goods shall be subject to the collection rate of 4%. If the auction goods fall within the scope of duty-free goods, they may be exempted from value-added tax with the approval of the competent tax authorities at the county level where the auction house is located. 2. Business tax shall be levied on the handling fees charged by the auction house to the entrusting party. Article 2 of the Announcement on the Collection Rate of Degenerate Value-added Tax in State Taxation Administration of The People's Republic of China (State Taxation Administration of The People's Republic of China Announcement No.36, 214) stipulates that Article 1 of the Notice of State Taxation Administration of The People's Republic of China on the Collection of Value-added Tax and Business Tax on Auction Income Obtained by Auction Houses (Guo Shui Fa [1999] No.4) is changed to "Collection of Value-added Tax at the Collection Rate of 3%". Annex 3 of the Notice of the Ministry of Finance of State Taxation Administration of The People's Republic of China on Incorporating Railway Transportation and Postal Services into the Pilot Project of Changing Business Tax to VAT (Caishui [213] No.16): Provisions on the Transition Policy of Changing Business Tax to VAT, Article 1 (1) stipulates that individuals are exempt from VAT when transferring their copyrights. Based on the above policies and regulations, for the auction house or auction company to auction VAT taxable goods, all the price and extra-price fees charged to the buyer shall be subject to VAT at the rate of 3%, and the painter personally entrusts the auction house to auction the calligraphy and painting he created, which can be exempted from VAT with the approval of the county-level competent tax authorities where the auction house is located. Business tax shall be levied on the handling fees charged by the auction house to the entrusting party. (II) Handling of Personal Income Tax 1. Taxes and tax rates applicable to auctioneers' calligraphy and paintings Article 1 of the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Personal Income Tax by Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that individuals auction their personal property through the auction market. (1) According to the Notice of State Taxation Administration of The People's Republic of China Municipality on Printing and Distributing the Provisions on Collecting Individual Income Tax (Guo Shui Fa [1994] No.89), the income obtained by auctioning the original or photocopy of the manuscript of the author's literary works should be deducted from the 8 yuan (the transfer income is less than 4, yuan) or 2% (the transfer income is more than 4, yuan). What we should pay attention to here is: how to define the original or copy of the manuscript of a written work, and why individual income tax is levied separately on the items derived from "royalties". Article 4 of the Regulations on the Implementation of the Copyright Law of the People's Republic of China clearly explains that written works refer to novels, poems, essays, papers and other works expressed in written form. According to the Individual Income Tax Law of the People's Republic of China, the income from royalties refers to the income obtained by individuals from providing the right to use patents, trademarks, copyrights, non-patented technologies and other franchises, and the income obtained from providing the right to use copyrights, excluding the income from royalties. It can be seen that the auction of the original or photocopy of the manuscript of a written work will involve property rights other than personal rights in copyright, such as the right to copy, the right to distribute and the right to rent, and it is a kind of income related to copyright. Therefore, the auction of the original or photocopy of the manuscript of a written work is different from the auction of other property, and personal income tax should be levied according to the items obtained from "royalties". (2) When an individual auctions other property except the original manuscript and photocopy of a written work, the taxable income shall be the balance of the transfer income after deducting the original value of the property and reasonable expenses, and the personal income tax shall be paid at the rate of 2% according to the "income from property transfer" item. It should be noted that private property refers to all personal property such as calligraphy and painting, porcelain, jade, jewelry, stamp products, coins, ancient books, antiques, patents, non-patented technologies and trademark rights. Article 4 of the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Individual Income Tax on Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that if a taxpayer cannot provide a legal, complete and accurate certificate of the original value of the property and cannot correctly calculate the original value of the property, the individual income tax shall be calculated and paid at the rate of 3% of the transfer income; If the auction items are identified by the cultural relics department as cultural relics returned from overseas, personal income tax shall be calculated and paid at the rate of 2% of the transfer income. Based on the above policy, auction houses or auction companies auction painters' calligraphy and paintings, and the taxable income shall be the balance of the transfer income after deducting the original value of the property and reasonable expenses, and the personal income tax shall be paid at the rate of 2% according to the item of "income from property transfer". If the original value certificate of calligraphy and painting cannot be provided legally, completely and accurately, and the original value of calligraphy and painting cannot be calculated correctly, personal income tax shall be calculated and paid at the rate of 3% of the transfer income; If the auctioned calligraphy and paintings are recognized by the cultural relics department as returned cultural relics from overseas, personal income tax shall be calculated and paid at the rate of 2% of the transfer income. 2. Taxes are levied on the auction of calligraphy and paintings at the final auction transaction price. The Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Relevant Issues Concerning the Collection of Personal Income Tax on Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that when personal income tax is levied on the auction income of personal property, the final auction transaction price of the property is the transfer income. How to determine the final auction price? Article 51 of the Auction Law stipulates that the highest bid of a bidder shall be confirmed by the auctioneer or by other public means. According to this clause, the highest price that causes the auctioneer to drop the hammer is the final auction price. However, in a special case, Article 39 of the Auction Law stipulates that if the buyer fails to pay the price as agreed, he shall be liable for breach of contract, or the auctioneer shall auction the auction target again with the consent of the client. If the auction price of the auction target is lower than the original auction price, the original buyer shall make up the difference. That is, the transfer income of personal property auction under special circumstances is the sum of the re-auction price and the difference made up by the original buyer. For example, Zhang San commissioned an auction house to auction a painting and calligraphy, and Li Si became the buyer with the highest bid of 1,1, yuan. But then Li Si repented, thinking that the painting was not worth so much money, and refused to pay the price as agreed. With Zhang San's consent, the auction house auctioned the calligraphy and painting again, but the price of the second auction was only 951, yuan. According to the regulations, the original buyer Li Si should make up the difference between the second auction and the original auction price of 51, yuan to Zhang San. In this case, the transfer income of Zhang San's calligraphy and painting auction is still 11, yuan, not 951, yuan. 3. Auctioned calligraphy and painting can be deducted before tax with legal and valid vouchers. According to the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Issues Concerning the Collection of Individual Income Tax by Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38), when the taxable income is calculated by applying the "property transfer income" item to the auction income of personal property, the taxpayer shall deduct the corresponding amount from its transfer income with legal and valid vouchers (official invoices supervised by the tax authorities, relevant overseas transaction documents or customs declaration documents, tax payment certificates, etc.). First of all, the original value of the property refers to the price that the seller personally obtains the auction item. The determination of the original value of the property is divided into five situations: first, it is purchased through shops, galleries, etc., which is the actual price paid when purchasing the auction item; Second, the price actually paid for the auction and the relevant taxes paid for the auction; Third, through the ancestral collection, the expenses incurred in collecting the auction items for them; Fourth, the relevant taxes and fees incurred when the auction item was donated; Five is obtained through other forms, with reference to the above principles to determine the original value of the property. Secondly, the taxes paid during the auction of property specifically refer to the relevant taxes and surcharges actually paid during the auction of property. Thirdly, the reasonable expenses refer to the auction fees (commissions), appraisal fees, evaluation fees, catalogue fees, certificate fees and other fees actually paid by taxpayers in accordance with the regulations when auctioning property. Regarding the auction fee (commission), refer to Article 56 of the Auction Law of the People's Republic of China: "The client and the buyer may agree on the proportion of the commission with the auctioneer. If the client, the buyer and the auctioneer have not agreed on the commission ratio, and the auction is concluded, the auctioneer may charge the client and the buyer a commission not exceeding 5% of the auction transaction price. The proportion of commission charged shall be determined according to the principle of inversely proportional to the auction transaction price. If the auction is not completed, the auctioneer may charge the agreed fee to the client; If no agreement is made, the client may be charged a reasonable fee for the auction. " The auction fees (commissions) of buyers and sellers are generally below 1% of the auction transaction price, and the specific standards for auction institutions to collect commissions from buyers and sellers are determined according to international practices and market conditions. Article 6 of the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Individual Income Tax on Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that taxpayers who can provide legal, complete and accurate original value certificates of property, but cannot provide relevant tax and fee certificates, shall not calculate and pay taxes according to the collection rate, and shall deduct the amount indicated on the original value certificates of property according to the facts, and calculate and pay individual income tax according to the provisions of the tax law. For example, Zhang, a resident of a city, commissioned an auction house to auction a calligraphy and painting he bought from the people at a price of 21, yuan in 25, and the final auction price was 51, yuan. Assuming that the value-added tax is 21, yuan, the urban maintenance and construction tax is 14 yuan, and the education fee is added to the 6 yuan (the auction fee and other expenses can be deducted according to the facts, which are ignored here for the convenience of calculation; Other taxes and fees are ignored, the same below), then the personal income tax payable by Zhang is = (51-21-21-14-6) × 2% = 9116 (yuan). If Zhang can't provide relevant vouchers for paying taxes and fees, he can only provide vouchers for the original value of the property. Personal income tax payable = (51,-21,) × 2% = 91,6 yuan. 4. There are two situations in which the personal income tax is approved. First, the original value of the property cannot be correctly calculated without providing legal, complete and accurate certificates. The Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Personal Income Tax on Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that if a taxpayer cannot provide a legal, complete and accurate certificate of the original value of the property and cannot correctly calculate the original value of the property, the personal income tax shall be calculated and paid at the rate of 3% of the transfer income; If the auction items are identified by the cultural relics department as cultural relics returned from overseas, personal income tax shall be calculated and paid at the rate of 2% of the transfer income. Here, we should focus on the identification of "returned cultural relics from overseas". Overseas returned cultural relics are mainly determined by the provincial cultural relics management committees (hereinafter referred to as cultural relics management committees) according to the customs entry records, and the auction institutions withhold and pay taxes according to the identification materials issued by the cultural relics management committees at the rate of 2%. Compared with the collection rate of 3%, the collection rate of 2% reflects the state's encouragement and support for the auction of cultural relics returned from overseas in China. For example, Wang, a resident of a city, entrusted an auction house to auction a calligraphy and painting he bought from the people at a price of 21, yuan in 26. The final auction price was 61, yuan, and Wang could not provide the original certificate for buying the calligraphy and painting. Therefore, it is necessary to pay personal income tax at 3% of the transfer income = 61,× 3% = 11,8 yuan. Second, it is regarded as a legal, complete and accurate proof of the original value of the property, and the original value of the property cannot be calculated correctly. Article 5 of the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Individual Income Tax on Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that if the contents of the original value certificate of the taxpayer's property are not standardized, or if an original value certificate of the property includes multiple auctions and the original value of each auction item cannot be confirmed one by one, it shall not be used as the calculation basis for deducting the original value of the property, and it shall be deemed that a legal, complete and accurate original value certificate of the property cannot be provided, and For example, Wang bought back several calligraphy and paintings from abroad last year, which have been recognized by the cultural relics department as returned cultural relics overseas. He commissioned an auction house to auction one of them at a price of 1,1, yuan, and the original value on the original value certificate of the property provided was the sum of the original values of several auction calligraphy and paintings. Therefore, Wang should pay personal income tax at 2% of the transfer income =11×2%=21 (yuan). 5. Provisions on Tax Declaration of Personal Income Tax on Auction Calligraphy and Painting Article 7 of the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Personal Income Tax by Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38) stipulates that the personal income tax payable from the auction of personal property shall be withheld and remitted by the auction unit, and the tax declaration shall be handled with the competent tax authorities where the auction unit is located according to regulations. Article 8 stipulates that when an auction unit withholds and remits the personal income tax payable from the auction of personal property, it shall fill out a tax payment certificate for the taxpayer, and clearly indicate the name of each auction item, the auction transaction price and the amount of tax withheld.
3. Tax planning of individual tax meter for auction calligraphy and painting According to the Notice of State Taxation Administration of The People's Republic of China on Strengthening and Regulating the Collection of Individual Income Tax for Individuals Obtaining Auction Income (Guo Shui Fa [27] No.38), the individual income tax from auction can be calculated by two methods: the value-added part and the approved collection rate, leaving room for tax planning. For example, Mr. Li bought a calligraphy and painting for 21 yuan in 212, and now the price of this calligraphy and painting has risen to 51 yuan. If Mr. Li's individual tax is calculated according to the value-added part, the tax payable is (51-21) × (1-1% )× 2% = 541 (yuan) (the commission is calculated at 1%), and if it is calculated at the rate of 3% of the transfer income, then