China: Three-tier taxation on dividend payments to individual investors



1 January 2013

the Chinese Ministry of Finance (MoF) has announced, with the approval of the State Council, that China will begin to levy differentiated dividend taxes on individual investors according to how long the investors have held their shares.

The specific rates for individual investors will be as follows:

  • For shares held for more than one year, 5%;
  • For shares held for one month to one year, 10%;
  • For shares held for less than one month, 20%.

The shares included are those of publicly listed companies purchased via public offering or on the secondary market. Currently, dividend tax rates stand at 10% for all shareholders in China and the withholding agents are the respective listed companies.

According to the MoF1, this policy is being implemented to encourage long-term investment to promote the healthy development of China's capital market.

Impact on customers

The tax due will be calculated, based on the holding period, at Chinese CSD/depository level, according to the underlying settlement information2. Customers of Clearstream Banking3 will potentially be subject to deduction of tax at the higher rates, with income payment following the calculation from CSD/depository.

Investors in B-shares who are eligible for a lower tax rate in accordance with a Double Taxation Treaty (DTT) can apply for a tax refund to the local tax authorities of the paying agent (that is, the respective listed company). The local tax authorities will then, subject to the validity of the application, apply the provisions of the relevant DTT.

Neither Clearstream Banking nor its depository HSBC are paying agents in this matter and are unable to assist with any tax relief/reclaim application. Customers should seek professional advice from their local tax consultant.

Further information

For further information, customers may contact the Clearstream Banking Tax Help Desk on:

Telephone:+352-243-32835+49-(0) 69-2 11-1 3821
Fax:+352-243-632835+49-(0) 69-2 11-61 3821

or Clearstream Banking Customer Service or their Relationship Officer.

1. (in Chinese).
2. For settlement, customers are required to provide their brokers with their investor code and with HSBC’s clearing participant code.
3. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).

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