Chinese Bank Granted Tax Breaks To Smooth IPO

by Mary Swire, Tax-News.com, Hong Kong

04 September 2006

The state-owned Industrial and Commercial Bank of China will reportedly receive special tax exemptions ahead of its dual listing on the Hong Kong and Shanghai stock exchanges, in order to attract investors in what is expected to be the world's largest ever initial public offering.

According to a notice published by China's State Administration of Taxation, which was quoted in an edition of the Shanghai Daily, ICBC must re-evaluate all of its assets prior to the listing, but will not be liable for corporate tax on profits earned from assets that have grown in value since their purchase.

In addition, any depreciation charges following the re-evaluation of the assets will also be exempt from taxes, according to the report.

“ICBC can enjoy preferential tax policies from financial authorities to boost its restructuring and listing plan," the SAT was quoted as stating.

Analysts expect ICBC to raise US$21 billion later this year in what will be the world's largest initial public offering. According to Bloomberg, the bank wants to raise US$14 billion of this in Hong Kong, with the remainder to be raised in Shanghai.

ICBC controls about 16% of China’s US$4.9 trillion in banking assets.

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