China Extends Housing Tax Refund for Home Buyers to 2027

China’s State Taxation Administration (SAT) has confirmed that the personal income tax refund policy for residents who sell one home and purchase another will remain in effect through December 31, 2027, providing clarity for home buyers amid ongoing questions about the policy’s status. The announcement, published on June 26, also introduced new reduced prepayment rates for the country’s digital tax invoicing system for the recycling industry.

Policy Extension Details

According to CCTV News, the tax authority issued a notice confirming that the housing-related tax incentive, originally introduced in 2022, has been extended under Announcement No. 3 of 2026, jointly issued by the Ministry of Finance, the State Taxation Administration, and the Ministry of Housing and Urban-Rural Development.

Under the extended policy, taxpayers who sell their owned home and purchase a new home in the same city within one year of the sale may apply for a refund of the personal income tax paid on the sale of their previous home. The policy covers transactions occurring between January 1, 2026, and December 31, 2027. The application procedures remain unchanged, with eligible taxpayers following the rules established under the SAT’s Announcement No. 21 of 2022.

Context: China’s Struggling Housing Market

The extension comes as China’s real estate sector continues to face significant headwinds. Since 2021, the market has experienced declining home prices, reduced sales volumes, and financial distress among major developers. The government has rolled out a series of measures to stabilize the market, including lowering mortgage rates, easing home purchase restrictions, and providing tax incentives.

The home exchange tax refund policy was originally introduced in September 2022 as part of broader efforts to stimulate housing demand and encourage homeowners to trade up to newer or better-located properties. By confirming the extension through 2027, Beijing signals its continued concern about the health of the property market and its commitment to supporting housing demand over the medium term.

Digital Tax Reforms for the Recycling Industry

Alongside the housing policy clarification, the SAT announced significant changes to the “three-streams-in-one reverse invoicing” system — a digital tax collection mechanism that integrates tax rules directly into online payment platforms such as Alipay, WeChat Pay, and UnionPay.

Effective July 1, 2026, the personal income tax prepayment rate for scrap product sellers using this system will be reduced to 0.25% for annual sales up to 600,000 yuan (approximately $83,000), down from the standard 0.5%. Amounts exceeding 600,000 yuan will continue to be taxed at 0.5%. The reduced rate is designed to encourage more recycling enterprises and individual sellers to adopt the digital invoicing system, which automates tax calculation, withholding, and remittance when resource recovery companies pay scrap product sellers.

Analysis: A Two-Pronged Policy Approach

The dual announcement reflects China’s broader economic strategy. On one hand, the housing tax extension supports consumer demand in the beleaguered property sector. On the other, the reverse invoicing reforms advance the government’s push toward digital tax administration, reducing compliance costs and minimizing tax evasion.

The recycling industry reforms are also linked to the State Council’s “Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Trade-In” (Guofa [2024] No. 7), which aims to stimulate economic activity by encouraging replacement of old equipment and consumer goods. The streamlined tax process for scrap product sellers supports the recycling supply chain, a key component of this trade-in program.

What to Watch For

With the housing tax policy now locked in through 2027, market observers will be watching for additional measures to support China’s property sector, including potential further interest rate cuts or relaxation of home purchase restrictions. The effectiveness of the tax refund policy in stimulating home purchases remains an open question, as broader economic headwinds — including consumer caution and oversupply in many cities — continue to weigh on the market.

Meanwhile, the rollout of the “three-streams-in-one” reverse invoicing system will be closely monitored as a test case for China’s broader ambitions to digitize tax collection across other sectors of the economy.