【Financial Str. Release】China releases preferential tax policy package for CDR investment to boost innovative businesses

Photo taken on Aug. 24, 2020 shows the Shenzhen Stock Exchange in Shenzhen, south China's Guangdong Province. (Xinhua/Mao Siqian)

BEIJING, Aug. 23 (Xinhua) -- Chinese finance, taxation and securities regulators unveiled on Monday a package of preferential tax policies on investment in Chinese depository receipts (CDR) of innovative companies to further leverage innovation-driven development, reported Xinhua Finance on Tuesday.

For individual investors, they will be exempted from paying individual income tax (IIT) for gains from transfer of innovative company CDRs at different selling and purchase prices from September 21, 2023 to December 31, 2025.

Differentiated individual income tax policies are applicable to their dividend and bonus incomes from holding CDRs of innovative companies and related IIT on personal investors will be deducted and paid by the corresponding domestic custodians of CDRs of innovative firms on behalf of individual investors.    

For corporate investors, their incomes obtained from transferring innovative company CDRs at different selling and buying prices and from related dividends and bonuses are exempted from business income taxation.

For publicly-offered securities investment funds, referring to closed-end and open-end securities investment funds, their gains from transferring innovative company CDRs at different selling and buying prices and related dividends and bonuses from holding the CDRs are temporarily free of business income taxation.

For qualified foreign institutional investors (QFII) and Renminbi QFIIs (RQFIIs), their incomes acquired from transferring innovative company CDRs at different selling and buying prices and from related dividends and bonuses from CDR holdings are also exempted from business income taxation.

On Shanghai Stock Exchange and Shenzhen Stock Exchange, transfer of innovative company CDRs requires the seller to pay securities trading stamp duty of 1 ‰ of the actual trading value.

Innovative company CDRs here mean depository receipts issued and traded on bourses in China by overseas listed pilot enterprises to represent a pool of their overseas-listed stocks. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)