Compliance
Compliance: How to Navigate China’s Renewed ‘Housing Exchange’ IIT (Personal Income Tax) Refund Policy
China has extended its personal income tax refund policy for homeowners who sell and repurchase within one year—under what terms and how taxpayers must comply to get refunds.
By NomadicTax Research Team • 5-8 min read • August 11, 2026
## Background: Supporting Residents with Housing Improvements
A joint announcement in early 2026—**Announcement No.3 by the Ministry of Finance, State Taxation Administration, and Ministry of Housing and Urban-Rural Development**—extended to **December 31, 2027**, a favorable policy whereby taxpayers who sell their existing home and repurchase another in the same city within one year can claim a refund of personal income tax paid on the sale. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
If the new home’s value is equal to or greater than the selling price, the full previously paid tax is refunded. If less, a proportional refund is calculated. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
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## Key Compliance Requirements
Failing any condition may lead to disqualification or lower refund. Here’s what taxpayers must check:
- **Same city requirement**: The house you sell and the new one you buy must be in the same city—this includes all administrative districts of that city. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
- **Timing**: The repurchase must happen **within one year** after the sale. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
- **Ownership link**: You (or one of you if multiple owners) of the sold home must be the owner of the newly acquired property. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
- **Transaction documentation**: Contracts and deed proofs must be valid, and if the new home is a new property, its sales contract must be registered (net-signed) with the housing urban-rural development department; for a second-hand home, transfer price and deed certificate. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
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## Supporting Measures and Recent Clarifications
To govern refunds and prepayments, there was **Announcement No. 12 (2026)** issued by the STA, giving further detail:
- From **July 1, 2026**, sales of scrap products from individuals to resource recycling companies via “reverse invoicing” have lower prepayment rates of IIT depending on annual turnover. ([fgk.chinatax.gov.cn](https://fgk.chinatax.gov.cn/zcfgk/c100012/c5250556/content.html?utm_source=openai))
- The earlier refund policy refers back to the announcement from January 2026 (No. 3) and uses specific procedural rules from earlier reverse invoicing policies when disposing of scrap for records. ([fgk.chinatax.gov.cn](https://fgk.chinatax.gov.cn/zcfgk/c100012/c5250556/content.html?utm_source=openai))
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## Real-world Example
Suppose **Ms. Li** in Chengdu sells her home on June 1, 2026, for **¥4,000,000**, pays personal income tax on that sale, and purchases a new home on April 15, 2027, for **¥3,000,000** in the same city. Because the new home's price is less than the old, refund = (**¥3,000,000 ÷ ¥4,000,000**) × tax paid on sale. If she had bought for **¥4.5 million**, she would be eligible for a **100% refund**.
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## Steps to Claim the Refund
1. Prepare contracts for both sale and purchase, ensure proper registration and net-signing if relevant.
2. Keep deed certificates or contract filings.
3. File application with your local tax office using the prescribed forms.
4. Be ready to provide proof of ownership and identity.
5. If the housing department and tax office have not yet realized real-time data sharing locally, delays may occur—advocate for prompt information sharing. The policies emphasize real-time contract record sharing for efficient refunds. ([gs.mof.gov.cn](https://gs.mof.gov.cn/zhengcefagui/202606/t20260601_3990935.htm?utm_source=openai))
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## What Practitioners Should Watch For
- Validity of contracts and registration matters more now with data sharing requirements.
- Be precise about city boundaries—misinterpreting administrative units can disqualify claims.
- The one-year rule is tight—missing that window means no refund.
- Keep track of new announcements clarifying form workflows or transitional arrangements since some rules refer to other “reverse invoicing” and income prepayment policies.
This extended policy highlights China’s continued support for moving residents to better housing and incenting property upgrades—but only for those who follow requirements carefully and document all steps.