Implementation of the New Stamp Duty Law in China from July 1st

During the 13th National People’s Congress at the 29th session, the Stamp Tax Law was passed by the Standing Committee and will take effect from July 1st, 2022, replacing the previous prevailing regulation.

The enactment of this law is to further standardize the collection and management of stamp duties, strengthen the stamp duty tax service and promote the reform of the taxation system of “administration and service”.

Noteworthy changes include appropriate simplification of tax items and tax cuts, in summary:

Changes:

1. Taxpayers shall fill in the Schedule of Stamp Duty Sources for the comprehensive declaration of property tax according to the situation of taxable contracts, title transfer documents and business books.

2. If the amount of taxable contracts and property rights transfer instruments is not specified and the amount is determined at the time of subsequent actual settlement, the taxpayer shall declare the taxable contracts and property rights transfer instruments in the first tax declaration period in which the taxable contracts and property rights transfer instruments are drawn up, and declare the payment of stamp duty on the basis of the actual settlement amount in the next tax declaration period after the actual settlement.

3. Stamp duties are levied on a quarterly, annual or recurring basis. Stamp duties on taxable contracts and transfer of title documents can be paid on a quarterly or recurring basis. Stamp duties on taxable business books can be declared and paid on an annual or recurring basis.

For foreign entities or individuals, the stamp duty on taxable documents may be declared and paid on a quarterly, annual or recurrent basis, with the specific taxation period determined by the taxation bureau of each province, autonomous region, municipality directly under the Central Government or municipality separately listed in the plan, taking into account the actual practice of collection and administration.

4. If the taxpayer is a foreign entity or individual with an agent in the territory, the latter is the withholding agent who shall pay the stamp duty in accordance with the provisions and declare the tax to the competent tax authority in the place of residence of the domestic agent.

If the taxpayer is a foreign entity or individual without an agent in the territory, the taxpayer shall declare and pay the stamp duty to the competent tax authority at a different location, for example, the place where the assets are delivered, the place where the domestic service provider or recipient is located, or the place where taxable documents are located; if the transfer of property rights involves real estate, the tax shall be declared and paid to the competent tax authority where the real estate is located.

5. After the implementation of the Stamp Duty Law, taxpayers shall continue to enjoy the preferential stamp duty policy by the method of "self-judgment, declaration of enjoyment and retention of relevant information for inspection". Taxpayers shall bear legal responsibility for the authenticity, completeness and legality of the information kept for inspection.

Some new exemptions:

a. Electronic orders between e-commerce businesses and individual buyers will not be dutiable transactions under the Stamp Duty Law.

b. Sales contracts and agricultural insurance contracts signed by farmers, family farm, farmers’ specialized cooperatives, rural collective economic organizations or villagers’ committees for the purchase of agricultural production materials, or agricultural sales will not be dutiable transactions under the Stamp Duty Law.

c. Non-interest bearing or interest subsidy loan contracts and preferential loan contracts signed by international financial organizations for China will not be dutiable transactions under the Stamp Duty Law.

d. Taxable documents issued by foreign embassies, consulates, representative offices of international organization in China, Chinese People’s Liberation Army, Armed Police Forces will not be dutiable transactions under the Stamp Duty Law.

e. Sales contracts signed by non-profit medical and health institutions for the purchase of drugs or sanitary materials will not be dutiable transactions under the Stamp Duty Law.

Stamp duty compliance shall be kept in good consideration, being a frequent matter for all corporate taxpayers, who are advised to take heed of the key rules as outlined in this article in order to avoid incurring fines and penalties due to neglect or late payments.

At PHC Advisory, we can offer all necessary support and advise related your business in China. We constantly monitor the regulatory and fiscal updates in China market and if you would like to know more about the most recent tax developments, please contact us at info@phcadvisory.com.