Stamp Tax Law repeals Provisional Regulation

​Effective 1 July 2022, the new Stamp Tax Law promulgated on 10 June 2021 will come into force. With the entry into force of the Stamp Tax Law, the "Provisional Regulation of the People's Republic of China on Stamp Tax" in force since 1988 will be repealed.

The general tax framework for stamp duty will remain largely unchanged by the Law, provided no adjustments are made before it enters into force next year. However, tax items and tax rates will be partially simplified by the Law.

Entities and individuals that issue documents subject to stamp tax and conduct securities transactions within the territory of China are liable for stamp tax. Likewise, this applies to the issuance of corresponding documents by entities and individuals abroad when such documents are used within the territory of China. The law contains a list of documents subject to stamp tax in an annex. In the case of securities transactions, the transferor and not the transferee is liable to pay the stamp tax.

The Law contains detailed provisions on the determination of the tax base as well as exemptions from the stamp tax obligation. In addition, reductions or exemptions from the stamp tax obligation may be granted if they serve the economic and social development of the state, e.g. to meet housing needs or to promote the development of micro and small enterprises.

If foreign entities or individuals are subject to stamp tax and they have a representative or agent in China, that local representative or agent must withhold the stamp tax. If there is no such representative or agent, the foreign taxpayer must pay the tax itself.

The Law does not contain its own penalty provisions for violations. In this context, reference is made primarily to the punitive provisions of the "Tax Collection and Administrative Law of the People's Republic of China" and other relevant laws and administrative regulations.