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China Drops Income Tax On Securities Trading

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

24 March 2008


Corporate taxes due on Chinese mutual funds have been temporarily suspended as the government attempts to give the nation's sagging stock market a fillip.

According to a statement released by the Ministry of Finance and the Administration of Taxation on Wednesday, income from stock and bonds trading by securities investment funds will be free from enterprise income tax for an indeterminate period.

Gains from mutual fund dividends, as well as fund managers' income from mutual fund trading, are also now exempted from income taxes, the notice explained.

The preferential policies are aimed at promoting China's stock funds, but the notice did not stipulate how long the tax exemption will be in place.

The latest piece of fiscal intervention in the stock market by the Chinese government is in contrast to its recent policies, which were designed to cool a raging bull market with measures such a tripling in stamp duty. However, since hitting a historic peak in October 2007, the Chinese market has shed 40% of its value.


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