Is there a tax on subrogation?

Subrogation is generally taxable. However, if the subrogation occurs on the basis of statutory succession, it can be exempted from deed tax. According to the relevant laws and regulations, those who inherit the ownership of land and houses due to legal inheritance can be exempted from deed tax.

[Legal basis].

Article 1128 of the Civil Code of the People's Republic of China.

Where the decedent's children die before the decedent, the decedent's children are to be subrogated by the blood relatives of the decedent's children.

If the decedent's siblings die before the decedent, the children of the decedent's siblings shall inherit by subrogation.

Subrogated heirs can generally only inherit the share of the estate to which the subrogated heir is entitled.

Article 6 of the Deed Tax Law of the People's Republic of China, which came into effect on September 1, 2021.

Deed tax shall be exempted under any of the following circumstances:

1) State organs, public institutions, social organizations, and military units shall receive land and housing ownership for office, teaching, medical treatment, scientific research, and military facilities;

2) Non-profit schools, medical institutions, and social welfare institutions shall receive land and housing ownership for office, teaching, medical treatment, scientific research, pension, and assistance;

3) Inherit the land use rights of barren mountains, wastelands, and barren beaches for agriculture, forestry, animal husbandry, and fishery production;

4) Changing the ownership of land or houses between husband and wife during the existence of the marital relationship;

5) The legal heirs inherit the ownership of land and houses through inheritance.

Legal analysis: subrogation is a kind of inheritance system opposite to the standard inheritance, which is a special case of statutory inheritance, and the subrogated heir does not belong to the category of legal heirs stipulated in the inheritance law, so subrogation is subject to tax. Subrogation refers to a legal inheritance system in which the descendants of the decedent's children inherit the decedent's estate instead of the elder direct blood relatives who died first when the children of the decedent die before the decedent, also known as indirect inheritance and lease inheritance.

Subrogation is a system in statutory succession, and it is a system in which the subrogated heir inherits the share of the subrogated heir;It is a form of inheritance in which the children of the decedent die before the decedent, and the children of the decedent who die before the commencement of inheritance are called subrogated heirs, referred to as subrogated heirs;A system of subrogation by the direct blood relatives of the deceased's children. Legal basis: Article 1123 of the Civil Code of the People's Republic of China After the commencement of succession, it shall be handled in accordance with the statutory succession;If there is a will, it shall be handled in accordance with the testamentary inheritance or bequest; Where there is a bequest and maintenance agreement, it shall be handled in accordance with the agreement.

Article 1127 Inheritance shall be in the following order: (1) first order: spouse, children, parents; (2) Second order:

Siblings, grandparents, maternal grandparents. After the inheritance begins, it is inherited by the first-order heirs, and the second-order heirs do not inherit; If there is no first-order heir, the second-order heir shall inherit. For the purposes of this Part, the term "children" includes legitimate children, children born out of wedlock, adopted children and dependent stepchildren.

For the purposes of this Part, the term "parents" includes biological parents, adoptive parents and step-parents in a dependent relationship. The term "siblings" as used in this Part includes siblings of the same parents, half-siblings or half-siblings, adoptive siblings, and step-siblings who have a dependent relationship.