China puts forward tax incentives to support capital market growth

China's tax and finance authorities announced on Tuesday that they have enhanced and expanded a set of tax policies to support the growth of the capital market.

The Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission, have all introduced policies concerning various areas including the issuance of depository receipts by innovative enterprises, the commodity futures market and the Shanghai-Hong Kong Stock Connect.

These policies encompass personal income tax, corporate income tax, and value-added tax incentives. 

As per the latest update, overseas individual investors will enjoy an exemption from individual income tax on the income obtained from investing in Chinese domestic commodity futures like crude oil.

Operators of publicly offered securities investment funds will be exempt from value-added tax on income earned from the difference, following transfer of depository receipts issued by innovative enterprises during the fund operation process.

To enhance market stability, boost investor confidence, and foster the healthy development of the capital market, the majority of the announced tax incentives have been extended until the end of 2027.

The tax incentives offer dual advantages, according to Liang Ji, a researcher at the Chinese Academy of Fiscal Sciences.

Firstly, they increase returns for individual investors, thereby encouraging active investment. Secondly, they facilitate the development and enhancement of the Hong Kong stock market, while also promoting interconnectivity between the mainland and Hong Kong stock markets, Liang added.

(Cover via CFP)

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