China will launch its compulsory collection of individual income tax for second-hand housing transactions next Tuesday, China Business News reported.

        The State Administration of Taxation issued a notice Wednesday ordering local taxation authorities to collect a 20 percent income tax upon individual housing transactions. It also asked the local taxation officials to handle the collection together with other taxes collected in the transactions.

         Though the government has already issued policies on the collection, local taxation authorities have not forced sellers to pay it, but instead have authorized them to return the tax by themselves, Dong Pan, head of the real estate research institute in Beijing Normal University, told the newspaper.

        The notice allows deductions and exemptions. Sellers of budget houses and privatized public apartments can enjoy a refinishing deduction, which is up to 15 percent of the original price of the house. For others, the maximum deduction for refinishing is 10 percent.

To implement the preferential clauses, the notice also adjusted policies and made clear definitions on different housing types. The seller of an old home, who plans to buy a new one, may enjoy a full deduction or part of it, which depends on the gap between the price of the new house and the selling price of the old house. To enjoy the rebate, people also have to buy the new house within one year after they sell the previous one.

        There is a conflict between the notice and the central government's policies to develop the second-hand housing market, Dong said.

It may block the transaction of those newly bought apartments and cause a surge in Beijing's 2006 second-hand housing transaction prices, said Luo Yu, head of the market department of a Beijing real estate agency. About 1 percent surge on average, he added.