Market Taxation Guide - China

11.09.2020

This Market Taxation Guide (China) provides the following details:

  • Reference information about all taxes applied at source, through Clearstream Banking and its local depositories, to securities deposited in Clearstream Banking; and
  • Instructions for obtaining relief at source or a refund of withholding tax, where these are available, through Clearstream Banking.

New and improved tax information and procedures that become available will be included on an ongoing basis.

Important note:

This Market Taxation Guide (including any attachments and other links) is for informational purposes only and is not intended and should not be considered to be legal advice on any subject matter. Readers of this Market Taxation Guide, whether customers or otherwise, should not act or refrain from acting on the basis of any information included in this Market Taxation Guide without seeking appropriate legal or other professional advice.

Types of securities eligible in Clearstream Banking

  • Chinese debt securities traded in the China Interbank Bond Market (CIBM) are eligible to be held in Clearstream Banking; and
  • Chinese equities eligible in Clearstream Banking and traded in mainland China are B shares, which are shares of:
    • Companies listed on the Shanghai Stock Exchange and deposited at the Shanghai branch of the China Securities Depository and Clearing Corporation (CSDCC); or
    • Companies listed on the Shenzhen Stock Exchange and deposited at the Shenzhen branch of the CSDCC. 

Note:

  • Chinese H shares are also eligible in Clearstream Banking. These shares are issued by companies based in mainland China and regulated by Chinese law but denominated in Hong Kong dollars and traded on the Hong Kong Stock Exchange.
    Details of the taxation applied to H shares are available in the Market Taxation Guide - Hong Kong.
  • Chinese A shares are also eligible in Clearstream Banking. These shares are Renminbi-denominated, issued by companies based in mainland China and are traded on Chinese stock exchanges.
    Details of the taxation applied to A shares are available in the Market Taxation Guide - Hong Kong.

Withholding tax

Holding restriction

Withholding
tax rate

Relief
at source

Quick
refund

Standard
refund

Equities

 

No

10% a

n/a

n/a

n/a

CIBM bonds

 

No

10% b

n/a

n/a

n/a

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a. CSDC withholds 10% corporate income tax (CIT) at source and pays dividend in net amount to B-share foreign investors from 2010.
Pursuant to Notice Caishuizi[1994]20, which is still effective but may be revised later, dividends received by foreign individuals from foreign invested enterprises are exempt from individual income tax.

b. Except for treasury bonds and local government bonds, the coupon interest income is subject to 10% CIT and 6% VAT; capital gain is temporarily exempt from CIT.

The Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly issued the Notice (Caishui [2018] No.108), the CIT and VAT of the coupon interest income received by overseas institutional investor (OII) in CIBM are temporarily exempt for three years and the exemption period is from 7 November 2018 to 6 November 2021. However, the temporarily CIT exemption does not cover the coupon interest income received by and having an actual connection with OII setup institutions or establishments in China.

Clearstream Banking does not provide tax Relief at source, Quick or Standard refund services for the China market. Customers are advised to engage a local tax agent for all tax related matters according to market practice.

Capital gains tax

There is no capital gains tax withheld through Clearstream Banking on securities held in Clearstream Banking. Capital gains tax may however be payable on specific gains. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.

Stamp duty

There is no stamp duty withheld through Clearstream Banking on securities held in Clearstream Banking. Stamp duty may however be payable on specific transactions. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.