Foreign developers and corporations will start to pay a land-use tax from next year in Shanghai, according to a notice issued by the city government yesterday.

The land-use tax will range between 1.50 yuan to 30 yuan (US$4.06) per square meter, per year depending on the size and location of the property, the notice said.

Foreign companies are exempted from the tax before the notice takes effect but they still need to pay certain fees for land use. Domestic companies have been paying the tax since 1988.

Individuals are exempt from the tax on their residences.

The new policy means that developers have to pay tax for the land approved by authorities for construction of property projects.

The move is widely expected to add costs to developers which are hoarding land in order to fetch higher selling prices in the future.

"The tax won't affect the city's housing prices since it has been imposed for many years," said Xue Jianxiong, head of research at Shanghai Youwin Real Estate Information Service Co Ltd.

"Foreign firms mainly use office buildings, which account for less than one percent of the city's land," Xue said.

The notice ruled that land inside the Inner Ring Road will be levied 12 yuan to 30 yuan per square meter and land between the Inner Ring Road and Outer Ring Road will be levied six yuan to 20 yuan per square meter.

China has imposed a variety of taxes on developers, such as a land value-added tax and land-transfer fees.

The country will also levy a property tax in 10 regions on a trial basis next year, including Beijing, Shenzhen and Liaoning.

Analysts said that the property tax can reduce the number of idle properties, boost supply and slash housing prices.

Last month's average housing price in the mainland's 70 major cities jumped 9.5 percent on a yearly basis, compared with September's 8.9-percent growth rate.

(Shanghai Daily November 29, 2007 )