II. Tax policies to support the opening of financial markets to the outside world
1. Temporary Exemption of Enterprise Income Tax on Interest Income from Domestic Bonds Invested by Overseas Institutions
[Subject of application]
Foreign institutions investing in the domestic bond market
[Policy content]
From 7 November 2018 to 31 December 2025, the interest income on bonds obtained by foreign institutions investing in the domestic bond market is temporarily exempted from corporate income tax.
[Conditions of application]
The scope of the temporary exemption of enterprise income tax does not include the interest on bonds acquired by institutions and premises set up in China by foreign institutions that are physically connected with such institutions and premises.
[Policy basis]
1. Notice of the Ministry of Finance and the State Administration of Taxation on the Policies on Enterprise Income Tax and Value-added Tax for Overseas Institutions Investing in the Domestic Bond Market (Cai Shui [2018] No. 108)
2. Announcement of the Ministry of Finance and the State Administration of Taxation on the Renewal of Enterprise Income Tax and Value-added Tax Policies for Overseas Institutions Investing in the Domestic Bond Market (Announcement of the Ministry of Finance and the State Administration of Taxation No. 34 of 2021)
2. Hong Kong market investors investing in SSE-listed A-shares are temporarily exempted from income tax on the difference in price between the transfer of the shares.
[Subject of application]
Hong Kong market investors (including corporations and individuals) investing in SSE-listed A-shares via the Shanghai-Hong Kong Stock Connect
[Policy content]
Hong Kong market investors (including enterprises and individuals) investing in SSE-listed A-shares are temporarily exempted from income tax on the transfer spread income.
[Conditions of application]
Hong Kong market investors invest in A-shares listed on the Shanghai Stock Exchange through the Shanghai-Hong Kong Stock Connect.
[Policy basis]
Circular of the Securities and Futures Commission of the Ministry of Finance and the State Administration of Taxation on Relevant Tax Policies for the Pilot Interconnection Mechanism for Trading in the Shanghai and Hong Kong Stock Markets (Cai Shui [2014] No. 81)
3. Dividends received by Hong Kong market investors investing in SSE-listed A-shares are subject to income tax reduction and exemption
[Subject of application]
Hong Kong market investors (including corporations and individuals) investing in SSE-listed A-shares via the Shanghai-Hong Kong Stock Connect
[Policy content]
For dividend and bonus income derived by Hong Kong market investors (including enterprises and individuals) from their investment in SSE-listed A shares, before Hong Kong Securities Clearing Company Limited does not have the conditions to provide China Securities Depository & Clearing Company Limited with detailed data on the identity of the investor and the time of shareholding, the policy of differentiated taxation according to the time of shareholding will not be implemented for the time being, and the listed company will withhold the income tax at a rate of 10% and submit withholding tax declarations to its competent tax authorities for withholding declaration.
For Hong Kong investors who are tax residents of other countries and whose countries have signed tax treaties with China that provide for a tax rate of less than 10% on dividend and bonus income, enterprises or individuals may, on their own or by appointing a withholding agent, submit an application to the competent tax authorities of the listed company for enjoying the treatment under the tax treaty, and the competent tax authorities.After review, the competent tax authority shall refund the tax based on the difference between the already taxed amount and the tax payable calculated according to the tax treaty rate.
[Conditions of application]
Hong Kong market investors invest in A-shares listed on the Shanghai Stock Exchange through the Shanghai-Hong Kong Stock Connect.
[Policy basis]
Circular of the Securities and Futures Commission of the Ministry of Finance and the State Administration of Taxation on Relevant Tax Policies for the Pilot Interconnection Mechanism for Trading in the Shanghai and Hong Kong Stock Markets (Cai Shui [2014] No. 81)
4. Hong Kong market investors investing in A-shares listed on the Shenzhen Stock Exchange are temporarily exempted from income tax on the difference in the price of the shares transferred.
[Subject of application]
Hong Kong market investors (including corporations and individuals) investing in SZSE-listed A shares through Shenzhen-Hong Kong Stock Connect
[Policy content]
Income tax is temporarily exempted on the transfer spread income obtained by Hong Kong market investors (including enterprises and individuals) investing in A shares listed on the SZSE.
[Conditions of application]
Hong Kong market investors invest in A shares listed on the Shenzhen Stock Exchange through the Shenzhen-Hong Kong Stock Connect.
[Policy basis]
Circular of the Securities and Futures Commission of the State Administration of Taxation of the Ministry of Finance on the Relevant Tax Policies for the Pilot Interconnection Mechanism for Trading in the Stock Markets of Shenzhen and Hong Kong (Cai Shui [2016] No. 127)
5. Dividends received by Hong Kong investors investing in A shares listed on the Shenzhen Stock Exchange are subject to income tax reduction and exemption
[Subject of application]
Hong Kong market investors (including corporations and individuals) investing in SZSE-listed A shares through Shenzhen-Hong Kong Stock Connect
[Policy content]
For the dividend and bonus income derived by Hong Kong market investors (including enterprises and individuals) from their investment in A shares listed on the SZSE, before Hong Kong Securities Clearing Company Limited does not have the conditions to provide China Securities Depository & Clearing Company Limited with detailed data on the identity of the investor and the time of shareholding, the policy of differentiated taxation according to the time of shareholding will not be implemented for the time being, and the listed company will withhold the income tax according to the tax rate of 10% and submit withholding tax declaration to its competent tax authorities for withholding declaration.
For Hong Kong investors who are tax residents of other countries and whose countries have signed tax treaties with China that provide for a tax rate of less than 10% on dividend and bonus income, enterprises or individuals may, on their own or by entrusting the withholding agent, submit to the competent tax authorities of the listed company an application for a refund of the overpaid tax by enjoying the treatment under the tax treaty, and the competent tax authorities shall, after verification, refund the tax on the difference between the tax levied and the tax due calculated according to the tax rate of the tax treaty to the competent tax authorities if the tax conditions for the refund are fulfilled. After the competent tax authorities have verified the application and met the conditions for tax refund, the tax shall be refunded on the basis of the difference between the tax levied and the tax payable calculated in accordance with the tax rate of the tax treaty.
[Conditions of application]
Hong Kong market investors invest in A shares listed on the Shenzhen Stock Exchange through the Shenzhen-Hong Kong Stock Connect.
[Policy basis]
Circular of the Securities and Futures Commission of the State Administration of Taxation of the Ministry of Finance on the Relevant Tax Policies for the Pilot Interconnection Mechanism for Trading in the Stock Markets of Shenzhen and Hong Kong (Cai Shui [2016] No. 127)
6. Provisional exemption of income tax on transfer spread income derived by Hong Kong market investors from trading of Mainland fund shares
[Subject of application]
Hong Kong market investors (including corporations and individuals)
[Policy content]
Income tax is temporarily exempted on the transfer spread income derived by Hong Kong market investors (including enterprises and individuals) from buying and selling Mainland fund shares through mutual recognition of funds.
[Conditions of application]
Hong Kong market investors buy and sell Mainland fund shares through mutual recognition of funds.
[Policy basis]
Notice of the State Administration of Taxation of the Ministry of Finance and the Securities and Futures Commission on Relevant Tax Policies on Mutual Recognition of Funds between the Mainland and Hong Kong (Cai Shui [2015] No. 125)
7. Income tax reduction and exemption for Hong Kong market investors' income from Mainland fund distributions
[Subject of application]
Hong Kong market investors (including corporations and individuals)
[Policy content]
In respect of the income derived by Hong Kong market investors (including enterprises and individuals) from the distribution of Mainland funds through mutual recognition of funds, income tax shall be withheld from Hong Kong market investors at the rate of 10% when the Mainland listed company distributes dividends and bonuses to the Mainland fund; or at the rate of 7% when the enterprise issuing bonds distributes interest to the Mainland fund, and the Mainland listed company or the enterprise issuing bonds shall make withholding tax declarations to its competent tax authorities. The Mainland listed company or the enterprise issuing the bonds shall file a withholding tax return with the competent tax authorities of the Mainland listed company or the enterprise issuing the bonds. Income tax will no longer be withheld when the Mainland fund distributes income to investors.
[Conditions of application]
1. Investors in the Hong Kong market receive income from Mainland fund distributions through mutual recognition of funds.
2. Mainland fund managers should provide relevant information on Hong Kong market investors of Mainland funds to the relevant securities registrars and clearing organisations.
[Policy basis]
Notice of the State Administration of Taxation of the Ministry of Finance and the Securities and Futures Commission on Relevant Tax Policies on Mutual Recognition of Funds between the Mainland and Hong Kong (Cai Shui [2015] No. 125)