Page 168 - 2023 White Paper on the Business Environment in China
P. 168
3 White Paper on the Business Environment in China
2.5 Construction and Real Estate
Key Take-Aways comes with an applicable SD rate at 0.03%. The
preferential SD rate of 0.025% (which was reduced
• The new Stamp Duty Tax Law took effect from 0.05%) on paid-in capital and capital reserves
in July 2022. The law maintains the current recorded in the accounting books of an enterprise
stamp duty framework unchanged, simplifies was originally promulgated in Caishui [2018] No.
tax items and rates, alleviates tax burdens, and 50 (“Circular 50”, i.e., SD reduction and exemption
outlines the streamlined land appreciation tax on accounting records). Circular 50 also provides
declaration procedure. an SD exemption on dutiable accounting books.
These preferential treatments have been adopted
• China's central government won’t likely in the SD Law. Pursuant to Article 5 of the SD
be spending billions to save the struggling real Law, the dutiable amount of a taxable contract/
estate sector. instrument will exclude any VAT amount specified
in such contract/instrument. However, if the VAT
Background amount is not specified in the taxable documents,
the entire amount in the contract/instrument may
The new Stamp Duty (SD) Law of the People's be subject to SD without any deduction of VAT.
Republic of China (the SD Law), announced by To mitigate any controversy between taxpayers
the Standing Committee of the 13th National and tax authorities, it is important that taxpayers
People's Congress (NPC) in June 2022, came into segregate the contract price and VAT amount in
the following month. The SD Law contains 20 the taxable contract/instrument. Electronic orders
articles which cover the definition of taxpayers, between e-commerce businesses and individual
taxable scope, SD rates, tax basis and preferential buyers will not be dutiable transactions under
SD treatment, albeit no fundamental changes were the SD Law. In other words, for electronic orders
made to the prevailing SD system. Certificates of between e-commerce business and individual
rights, licenses and approvals and other accounting buyers, both the seller and buyer are exempt from
books are no longer listed as a taxable document. SD, while orders between e-commerce businesses
Accordingly, documents such as certificates of and other buyers (e.g., entities, enterprises, etc.) will
property, business licenses, and patent certificates still be subject to SD. There are a couple more key
will not be subject to stamping requirements. considerations. The SD Law specifically addresses
Under the SD Law, finance leasing contracts will situations where the dutiable contracts are drawn
be subject to SD at 0.01%, with the contractual up outside of China, citing that they would still fall
parties being equally liable, e.g., lessor and lessee within the SD scope, for instance, if the underlying
each bearing 0.005%. For securities transactions subject matter of a dutiable document relates to the
(referring to equity or equity-based securities transfer of equity in a Chinese resident enterprise,
transactions), SD will be charged on the transferor or real property located in China. The same also
at 0.1%. The applicable SD rate on contracts for applies to documents relating to the transfer of
processing work, transportation contracts and movable assets or trademarks, copyrights, patents
the instruments for the transfer of trademarks, and know-how so long as either the transferor
copyrights, patents and know-how is now 0.03%. or transferee is in China (except for the situation
Survey and design contracts for engineering where an overseas entity or individual transfers
constructions have been reclassified to fall under any of these items to a domestic Chinese entity or
the construction project contracts category, which individual on the basis that such subject matters
are fully utilized outside of China). In the context
168
2.5 Construction and Real Estate
Key Take-Aways comes with an applicable SD rate at 0.03%. The
preferential SD rate of 0.025% (which was reduced
• The new Stamp Duty Tax Law took effect from 0.05%) on paid-in capital and capital reserves
in July 2022. The law maintains the current recorded in the accounting books of an enterprise
stamp duty framework unchanged, simplifies was originally promulgated in Caishui [2018] No.
tax items and rates, alleviates tax burdens, and 50 (“Circular 50”, i.e., SD reduction and exemption
outlines the streamlined land appreciation tax on accounting records). Circular 50 also provides
declaration procedure. an SD exemption on dutiable accounting books.
These preferential treatments have been adopted
• China's central government won’t likely in the SD Law. Pursuant to Article 5 of the SD
be spending billions to save the struggling real Law, the dutiable amount of a taxable contract/
estate sector. instrument will exclude any VAT amount specified
in such contract/instrument. However, if the VAT
Background amount is not specified in the taxable documents,
the entire amount in the contract/instrument may
The new Stamp Duty (SD) Law of the People's be subject to SD without any deduction of VAT.
Republic of China (the SD Law), announced by To mitigate any controversy between taxpayers
the Standing Committee of the 13th National and tax authorities, it is important that taxpayers
People's Congress (NPC) in June 2022, came into segregate the contract price and VAT amount in
the following month. The SD Law contains 20 the taxable contract/instrument. Electronic orders
articles which cover the definition of taxpayers, between e-commerce businesses and individual
taxable scope, SD rates, tax basis and preferential buyers will not be dutiable transactions under
SD treatment, albeit no fundamental changes were the SD Law. In other words, for electronic orders
made to the prevailing SD system. Certificates of between e-commerce business and individual
rights, licenses and approvals and other accounting buyers, both the seller and buyer are exempt from
books are no longer listed as a taxable document. SD, while orders between e-commerce businesses
Accordingly, documents such as certificates of and other buyers (e.g., entities, enterprises, etc.) will
property, business licenses, and patent certificates still be subject to SD. There are a couple more key
will not be subject to stamping requirements. considerations. The SD Law specifically addresses
Under the SD Law, finance leasing contracts will situations where the dutiable contracts are drawn
be subject to SD at 0.01%, with the contractual up outside of China, citing that they would still fall
parties being equally liable, e.g., lessor and lessee within the SD scope, for instance, if the underlying
each bearing 0.005%. For securities transactions subject matter of a dutiable document relates to the
(referring to equity or equity-based securities transfer of equity in a Chinese resident enterprise,
transactions), SD will be charged on the transferor or real property located in China. The same also
at 0.1%. The applicable SD rate on contracts for applies to documents relating to the transfer of
processing work, transportation contracts and movable assets or trademarks, copyrights, patents
the instruments for the transfer of trademarks, and know-how so long as either the transferor
copyrights, patents and know-how is now 0.03%. or transferee is in China (except for the situation
Survey and design contracts for engineering where an overseas entity or individual transfers
constructions have been reclassified to fall under any of these items to a domestic Chinese entity or
the construction project contracts category, which individual on the basis that such subject matters
are fully utilized outside of China). In the context
168
