Stamp Duty Preferential Policies in Shanghai’s Special Areas
With mainland China vigorously developing pilot free trade zones (comprehensive bonded zones) and encouraging enterprises to register and operate in the trade zones, another preferential policy to bring relief to foreign trade enterprises has recently been released. Its main purpose is to support the development of offshore trade in the Pilot Free Trade Zone by giving preferential policies for stamp duty exemption.
Which Districts
Enterprises registered in the China (Shanghai) Pilot Free Trade Zone and LinGang New Area are exempted from stamp duty on contracts of sale and purchase for offshore resale business.
Here we need to make special expenditures: offshore resale, which refers to the resident enterprise from non-resident enterprises to buy goods, and then to another non-resident enterprise resale of the goods, and the goods have never actually entered or left the territory of our country transactions.
In fact, this is what we often refer to as “intermediary trade”, which refers to the business of importing and exporting goods in international trade, not directly between the producing country and the consuming country, but through a third country to trade.
Trade goods can be shipped from the exporting country to a third country, in the third country not through processing (conversion packaging, classification, selection, packing, etc. not as a processing theory) and then sold to the consumer country; also cannot pass through the third country and directly from the producing country to the consumer country, but the producer and the consumer country and the consumer country does not occur between the trade links, but by the transit country, respectively, with the producer and the consumer country to occur in the trade.
What is the Stamp Duty in China
Companies and individuals that write taxable certificates and conduct securities transactions within the territory of the People’s Republic of China are taxpayers of stamp duty and shall pay stamp duty in accordance with the provisions of this Law. Contracts of sale concluded by taxpayers within the territory of China are taxable contracts, and according to the Stamp Duty Law of the People’s Republic of China, both parties to the transaction are required to pay a stamp duty of three ten thousandths of the contract price.
Case Study
In a regular trade, Company A and Company B entered into a contract of sale and purchase of steel materials totaling CNY 500,000 to be purchased by Company A from Company B.
In accordance with the provisions of the Stamp Duty Law, at the end of the period, Company A and Company B are required to pay stamp duty as respectively:
- Company A (as buyer): 500,000 * 3/10,000 = CNY 150.00
- Company B (as the seller): 500,000 * 3/10,000 = CNY 150.00
So, in cross-border intermediary trade, the main trade subject is in China, which purchases goods from country A and sells them to country B. The main trade subject is in China. According to the law, the Chinese subject signs a procurement contract with country A and a sales contract with country B. If so, each contract is subject to stamp duty. With the support of this policy, re-exports in compliance with the regulations will be exempted from stamp duty, which greatly reduces the tax burden on enterprises.
Effective Period
The effective period of this policy is from 1 April 2024 to 31 March 2025. The preferential policy of exempting stamp duty will be applied to the stamp duty of cross-border transit trade contracts whose belonging period and tax collection period are within this interval.
Should you have any questions, please feel free to contact us.
References:
«Notice of Launching the Pilot Program of Preferential Stamp Tax Policies for Offshore Trade in the China (Shanghai) Pilot Free Trade Zone and the Lin-gang Special Area»
