Market Taxation Guide - China
This Market Taxation Guide (China) provides the following details:
- Reference information about all taxes applied at source, to securities deposited in Clearstream Banking1; 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.
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.
- 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.
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 Caishuizi20, 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.
On 27 October 2021, the premier of the State Council of the People’s Republic of China chaired a State Council executive meeting, and announced that the temporary exemption on the corporate income tax (CIT) and value-added tax (VAT) of the coupon interest income received by overseas institutional investors (OIIs) in the China bond market will be extended to the end of the "14th Five-Year Plan" (ie end of 2025). Foreign institutional investors will also benefit from the extension of the tax exemptions on their bond investments in the Chinese bond markets via Bond Connect until the end of 2025.
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.
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.
1. “Clearstream Banking” refers collectively to Clearstream Banking S.A. and Clearstream Banking AG (for Clearstream Banking AG customers using Creation accounts).