China: New stamp duty policy, pilot tax policy for temporary inbound repairs in Shanghai Free Trade Zone and continuation of personal tax policy on dividends and bonuses for SMEs

The Ministry of Finance and the State Administration of Taxation have issued new announcements, extending the scope of stamp duty exemption and reduction to areas such as the restructuring and reorganization of enterprises; the Shanghai Pilot Free Trade Zone has implemented a bonded policy for temporary entry of goods for repair; and the differentiated individual income tax policy on dividends and bonuses for companies listed on the National Small and Medium Enterprises Stock Transfer System will continue to be enforced.

1. New developments in stamp duty

The Ministry of Finance and the State Administration of Taxation jointly issued a new announcement on the stamp duty policy relating to the restructuring and reorganization of enterprises and the reorganization of public institutions, expanding the scope of stamp duty reduction and exemption to include the restructuring and reorganization of enterprises, bankruptcy and liquidation, and the reorganization of public institutions.

The main contents are: the stamp duty on business books of newly established enterprises is partially exempted, while the part of debt-to-equity conversion and appraisal of value-added is subject to stamp duty according to the regulations; taxable contracts and property transfer documents are exempted from stamp duty under certain conditions.

The policy applies from October 1, 2024 to December 31, 2027.

2. China (Shanghai) Pilot Free Trade Zone Pilot Temporary Inbound Repair Relevant Tax Policies

In China (Shanghai) Pilot Free Trade Zone (including Lingang New Area) Customs Special Supervision Zone, enterprises from abroad temporarily enter the pilot zone to repair goods enjoy bonded policy. The goods, when re-exported will be exempted from customs duties, import VAT and consumption tax. When the goods are not re-exported but instead converted for domestic sales, custom duties, import VAT and consumption tax will be levied in accordance with regulations.

This Circular shall come into effect on 27 June 2024 onwards.

3. Continuation of the Implementation of Differentiated Individual Income Tax Policy on Dividends and Dividends of Listed Companies in the National Small and Medium-sized Enterprise Stock Transfer System

Individuals holding shares of listed companies for a period of more than one year are temporarily exempted from individual income tax on dividends and bonuses; if the period of holding shares is less than one month (including one month), the full amount of dividends and bonuses is included in the taxable income; if the period of holding shares is more than one month and up to and including one year (including one year), the income from dividends and bonuses is temporarily reduced by 50% and included in the taxable income; and the above income is subject to the unified 20% tax rate for individual income tax. 

This policy applies from 1 July 2024 to 31 December 2027.

Reference Policies:

1. Announcement on Stamp Duty Policies Relating to Restructuring and Reorganisation of Enterprises and Restructuring of Institutions (Announcement of the Ministry of Finance and the State Administration of Taxation No. 14 of 2024)

2. Circular on Relevant Tax Policies on Pilot Temporary Inbound Repairs in China (Shanghai) Free Trade Pilot Zone (Caixa Tariff [2024] No. 18)

3. Announcement on the Renewal of the Implementation of the Differential Individual Income Tax Policy on Dividends and Dividends of Companies Listed on the National Small and Medium Enterprise Stock Transfer System (Ministry of Finance Sate Administration of Taxation Announcement No. 8 of 2024)

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