Compliance rules, tax rates, exemptions

China’s new stamp duty law comes into effect on July 1, 2022 – there will be updates to the existing tax system, such as simplification of tax compliance, changes to some tax rates and new exemptions .

On June 10, 2020, Stamp duty law was adopted by the Standing Committee of the 13th National People’s Congress at its 29th session, which will take effect on July 1, 2022.

The current regulations in force, Provisional Regulations of the People’s Republic of China on Stamp Duty (the “Interim Regulations”) promulgated by the Council of State on August 6, 1988, will be simultaneously abrogated by then.

Compared to the provisional regulations, the Stamp Duty Law maintains most of the current system of stamp taxation in general, but at the same time there are some notable changes, including appropriate simplification of tax elements and reductions in tax. ‘tax.

The main changes are summarized below.

China Stamp Duty Rate

Some strong points for the management of stamp duties

In view of the changes in the stamp duty law, there are also some points we would like to bring to your attention regarding the treatment of stamp duty in your day-to-day operations:

  1. Previously, the stamp duty on securities transactions was regulated by documents issued by the Ministry of Finance and the State Tax Administration. Now, with the publication of the Stamp Duty Law, this matter will be regulated by law, which has higher legal force. The stamp duty on securities transactions will continue to be levied on the transferor of the securities transactions rather than the transferee and the applicable tax rate remains at 0.1 percent of sales.
  2. The Stamp Duty Law states that the basis for calculating stamp duty excludes the amount of VAT specified in the taxable contract or transfer of ownership document. However, in the event that the amount of VAT is not specified in the taxable documents, the entire amount may be subject to stamp duty without deduction of the amounts of VAT. Thus, it is suggested that taxpayers indicate the amount of VAT separately from the contract price in the taxable documents.
  3. Direct donations may be exempt from stamp duty, according to the stamp duty law, which is different from the corporation tax law, where donations must be made through organizations charitable or popular governments at county level and above and tax exempt. Businesses are advised to be aware of this difference and not ignore or ignore this stamp tax saving treatment when making direct donations.
  4. It should be noted that loan contracts signed by companies and non-financial organizations are not subject to stamp duty. Moreover, according to Cai shui [2017] No. 77, loan contracts signed by financial institutions and micro and small businesses may be exempt from stamp duty, and the term of the contract has been extended until December 31, 2021, by Announcement from the Ministry of Finance and State Tax Administration [2021] Number 6. Businesses should be aware of this policy and use it to save tax on loan contracts if they are among the qualifying businesses.

Broader Context: Law-Based Tax Administration

In 2015, the State Tax Administration published the Guiding opinions on the comprehensive promotion of tax governance in accordance with the law (Shui Zong Fa [2015] No. 32), stipulating that China will speed up the process of upgrading the relevant tax regulations, in order to improve the security of tax policies, strengthen the authority of tax documents and ensure the efficiency of tax administrations. This is an important part of China’s broader efforts to achieve the rule of law, that is, rule-based governance of the country.

With the enactment of the Stamp Duty Law, China passed laws for 12 of the 18 existing taxes. Businesses are well advised to keep a close eye on the future development of Chinese tax laws, as they are tied to how they will pay their taxes in China.

Chinese tax laws - effective date

About Us

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors in China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the company for assistance in China at [email protected].

Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our commercial research facilities along the Belt and Road Initiative. We also have partner companies that assist foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.

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