The Ministry of Finance and the State Taxation Administration in China have announced details of a new approach to taxation of the Chinese capital markets. The new regime came into effect on 1 January.
According to the official circular, securities companies in China will now be allowed to deduct from taxable income regulatory fees levied by the stock exchanges; brokerage fees levied by the stock exchanges; account opening fees (for A and B shares and de-listed equities); non-trade transfer fees; the settlement fees for B shares; and custody fees collected by the China Securities Depository & Clearing Corporation (CSDCC).
“The new policy will reduce tax levies for securities companies in China,” says a spokesman for Citigroup in Shanghai. “According to statistics from 2004, the total value of equity transactions throughout the year 2004 is an estimated RMB 4,300 billion. The combined ratio of the regulation fee for securities transactions and intermediary fees for securities brokerage collected by the stock exchanges is 0.015%. Based on the average business tax rate in China, 7.2%, the implementation of the new policy will ease the tax burdens on securities companies by more than RMB 90 million.”