China Offers Tax Cuts to Investors

November 20, 2012 Taxation in China

The MarketBEIJING – In an attempt to buoy the country’s capital markets, Chinese tax authorities are making efforts to revive investors sentiment by changing the taxation of dividends. 

Following the end of trading on the stock markets on November 16th, the Ministry of Finance of China announced that the taxes applied on dividends will soon be lowered in order to encourage private individuals to invest in the local stock markets.

From January 1st 2013 investors who hold publicly listed shares for more than one year will only be liable to pay a 5 percent tax on any dividends earned, down by 5 percent from the current rate of 10 percent.

In order to discourage speculative trading, individuals who hold securities for less than one month will face an increased tax on dividend of 20 percent.

The current rate of 10 percent will be maintained for individuals who hold stocks for more than a month but less than a year.

In a statement the Ministry of Finance explained that the new rules should work in unison to promote the long-term development and profitability of the capital market in China.

The tax cut will complement a recent effort by the China Securities Regulatory Commission to encourage companies to increase cash dividend payments to investors when possible.

Photo by Iman Mosaad