What Types of Contracts are Exempt from Stamp Tax in China?

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We spotlight the 15 kinds of contracts in China that aren’t topic to stamp tax. Companies ought to notice these insurance policies are topic to alter. For instance, after the brand new Stamp Tax Legislation comes into power on July 1, 2022, certificates and licenses shall now not to topic to stamp tax.

Stamp tax, or stamp obligation, is a tax levied in China on authorized paperwork like contracts, certificates, and accounting books.

Guidelines concerning what are topic to stamp tax are primarily stipulated within the State Council’s Interim Laws of the Individuals’s Republic of China on Stamp Tax (efficient till July 1, 2022 when the brand new Stamp Tax Legislation comes into impact). Nonetheless, the State Taxation Administration (STA) has additionally launched different extra particular paperwork, which specify the kinds of contracts which might be exempted from stamp tax.

Why ought to enterprise care?

Though stamp obligation will not be a serious tax for many taxpayers, compliance with China’s laws ought to at all times be a key concern for international corporations. Non-compliance or underpayment will lead to a wonderful of as much as 30 instances tax payable. As a way to keep away from such a penalty and to avoid wasting price the place it’s attainable, all companies ought to have a greater thought of what documentation are topic to stamp tax and what usually are not.

To be famous, related guidelines and provisions usually are not static. The tax authority could modify a few of the exemption coverage based mostly on the financial state of affairs and the event of the society. For instance, the brand new Stamp Tax Legislation, which can take impact on July 1, 2022, stipulates that certificates and licenses shall now not to topic to stamp tax within the new regime. Companies working in China are recommended to pay nearer consideration to the ever-changing tax insurance policies.

On this article, we’ll stroll you thru 15 kinds of contracts that aren’t topic to stamp tax, as summarized by the Tax Bureau of Beijing Chaoyang District in an article posted on their official WeChat account.

15 kinds of contracts that aren’t topic to stamp tax in China

1. Sale-and-leaseback contract

Coverage foundation: Discover of the Ministry of Finance and the State Administration of Taxation on Stamp Responsibility Insurance policies Referring to Monetary Leasing Contracts (Caishui [2015] No. 144)

A sale-and-leaseback, typically referred to as a sale-leaseback, is an association that permits an organization to promote an asset to lift capital, then lets the corporate lease the identical asset again from the purchaser. On this method, an organization can get each the capital and the asset it wants for the enterprise operations.

In line with Caishui [2015] No. 144, for sale-and-leaseback financing transactions, contracts entered into between the lessee and the lessor on the market of leased asset and repurchase of lease asset shall not be topic to stamp tax.

2. Electrical energy provide contract

Coverage foundation: Discover of the Ministry of Finance and the State Administration of Taxation on A number of Insurance policies Referring to Stamp Duties (Caishui [2006] No. 162)

Stamp duties shall be levied on energy sale and buy contracts between a generator and an influence grid and between two energy grids (aside from inside mutual energy provide between all ranges of energy grid of the State Grid Company system and the China Southern Energy Grid Company system) as per sale and buy contracts.

Nonetheless, in response to Caishui [2006] No. 162, electrical energy provide contracts between energy grids and customers shall not be topic to stamp tax.