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stamp tax

stamp tax, method of collecting duties on certain transactions by means of a validating stamp attached to the taxable instrument, which may be a judicial act, a commercial document, a transfer of property, or law proceedings. Such a stamp is to be distinguished from a postage stamp, which is not a duty but a simple method of paying the government for a service rendered. Stamp taxes, apparently originating in the Netherlands, were introduced into England in 1694 and extended to the American colonies in 1765. Colonial opposition to stamp taxes contributed to the hostility against England that eventually resulted in the American Revolution. In the United States, stamp taxes, applying not only to legal and commercial acts but also to goods, were used to finance the Civil War and the Spanish-American War. Today the federal government imposes stamp taxes on the issue and transfer of stocks and bonds, on deeds, and on playing cards.

See J. Due, Government Finance (4th ed. 1968); J. W. Pyke, ed., An Alphabetical Guide to Stamp Duties (1968).

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Stamp Tax

STAMP TAX

A pecuniary charge imposed upon certain transactions.

A stamp tax is, for example, levied when ownership of real property is transferred. The tax is paid either by purchasing stamps that are then glued to the deed or by the use of metering machines that imprint the stamps on the deed.

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Stamp Tax

24 Stamp Tax

TAXPAYERS

TAX BASE AND SCOPE

TAX RATES AND TAX PER UNIT

COMPUTATION METHODS

REDUCTIONS AND EXEMPTIONS

PAYMENT PROCEDURES AND POLICIES

Employed by many administrations around the world, this tax is levied on documents written or received in the course of economic activities. The Provisional Regulations of the People's Republic of China Concerning Stamp Tax currently in force were promulgated by the State Council on August 6, 1988, and came into effect on October 1, 1988.

Stamp Tax is administered by the State Administration of Taxation (SAT) and the local tax bureaus. The revenue collected is shared between the Central Government and the local governments. In 2003, revenue from Stamp Tax amounted to 21.5 billion yuan, accounting for about 1.1% of the country's tax revenue.

TAXPAYERS

General Guidelines

Entities Subject to Tax

Any of the following entities that executes or receives specified economic documents within China may be subject to tax:

  • State-owned enterprises (SOEs), collectively owned enterprises, private enterprises, joint-equity enterprises, enterprises with foreign investment, foreign enterprises, and other enterprises.
  • Administrative units, military units, social organizations, and other units.
  • Individual business operators and other individuals.
Actual Taxpayers

For the following types of documents, the taxpayers are as listed:

  • Contracts: The executors.
  • Written evidence related to property title transfers: The signers.
  • Business accounting records: The record-establishing persons.
  • Rights permits or licenses: The recipients.
Withholding Agents

Units that handle the delivery of share titles should withhold tax related to the stock transactions.

TAX BASE AND SCOPE

What Constitutes a Taxable Document

Where documents are executed or received in the course of economic activities, they are deemed to be taxable documents.

Contracts

The following documents are subject to tax:

  • Purchase and sale contracts.
  • Processing contracts.
  • Construction and engineering subcontracts.
  • Property leasing contracts.
  • Goods transportation contracts.
  • Warehousing and storage contracts.
  • Borrowing contracts.
  • Property insurance contracts.
  • Technology contracts.
  • Documents of a contractual nature.

Others

  • Documents related to property title transfers.
  • Business accounting books.
  • Rights permits and licenses, and certificates.
  • Other documents as specified by the Ministry of Finance.

TAX RATES AND TAX PER UNIT

General Guidelines

Tax payable may be calculated in one of two ways, depending on the nature of the taxable documents (see Table 24.1):

  • Based on value, using a flat rate.
  • Based on quantity, using fixed tax amounts per unit.

Special Instances

Share-Title Transfers

Under special State Council rules, where share-title transfer documents are signed for the following transactions, the two parties signing the documents shall each pay tax based on what

Table 24.1 Taxable items and tax per unit
Tax category Scope Tax rate Taxpayers Notes
1. Purchase and sale contractsContracts for: Suppliers; advanced sales; institutional purchases; combined purchase and sales; cooperative manufacturing; assembly; compensation trade; barter. Similar contracts.0.03% of the value of the purchase or sale.Parties to the contract. 
2. Processing contractsContracts for: Processing; special orders; repair or renovation; overhauling; printing; advertising; surveying. Similar contracts.0.05% of the processing fee or the contracted receipts.Parties to the contract. 
3. Survey and design contracts for engineering and construction projectsSurvey and design contracts.0.05% of the receipts.Parties to the contract. 
4. Construction, installation, and engineering contractsConstruction, installation, and engineering contracts.0.03% of the contracted amount.Parties to the contract. 
5. Property leasing contractsContracts for leasing of: Buildings; ocean vessels; motor vehicles; aircraft; machinery; appliances; other such equipment.0.1% of the lease amount. Amounts less than 1 yuan shall be stamped as 1 yuan.Parties to the contract. 
6. Commodity shipping contractsContracts for: Civil aviation; railways; sea transport; inland waterways; overland and through transport.0.05% of the transport fees.Parties to the contract.Where the documents are used as contracts, tax stamps shall be affixed to the documents, e.g., contracts.
7. Warehousing contractsWarehousing and storage contracts.0.1% of the warehousing and storage fees.Parties to the contract. 
8. Loan contractsContracts for loans from: Banks; other financial organizations or lending agents. Excluding interbank loan agreements.0.005% of the loan amount.Parties to the contract. 
9. Property insurance contractsContracts for: Property insurance; responsibility; surety; credit.0.003% of the insurance premium.Parties to the contract. 
10. Technology contractsContracts for: Technology development or transfer; consulting; services. Similar contracts.0.03% of the indicated amount.Parties to the contract. 
11. Property transfer documentsFor transfers of: Property ownership; copyright; trademarks; patents; licensing. Similar transfer documents.0.05% of the indicated amount.Parties executing the documents. 
12. Business accounting documentsAccounting books for production or business operations.0.05% of the recorded capital, total original capital and independently contributed capital. Other accounting or bookkeeping documents: 5 yuan.Business accounting entities. 
13. Permits and licensesGovernment-issued building permits; industrial, commercial and business licenses; trademarks and patent certificates; land-use permits.5 yuan per piece.Party receiving the permits or licenses. 

the value of the transactions would be if they were actually carried out on the securities market on the same day as the transfer. The applicable tax rate shall be 1%.

  • Purchases.
  • Inheritances.
  • Gifting of shares publicly listed by the shareholding enterprises.

COMPUTATION METHODS

General Guidelines

Tax payable may be calculated in one of two ways, depending on the nature of the taxable documents.

  • Based on value and the applicable tax rate.
  • Based on quantity and the applicable tax per unit.

Comparing Methods

Value-Based

Where computation is value-based, tax payable shall be calculated based on the payment, fee, or revenue amounts listed in the taxable documents. The applicable statutory tax rate shall be used for computation.

Quantity-Based

Where computation is quantity-based, tax payable shall be computed based on the number of pieces of taxable documents involved. The applicable statutory tax per unit shall be used for computation.

Some Technicalities

Minute Amounts

Where tax payable amounts to less than 0.1 yuan, no tax shall be levied.

Rounding off

Where tax payable exceeds 0.1 yuan, figures shall be rounded off in the following manner:

  • Less than 0.05 yuan: Counted as 0.00 yuan.
  • 0.05 yuan or more: Counted as 0.10 yuan.

Special Instances

Where Different Rates Apply

Where a single document carries two or more taxable items for which different tax rates apply, tax should be computed separately for each taxable item.

Where payment amounts are separately listed, total tax payable shall be computed by adding together the tax payable for each instance.

Where payments are not separately listed, tax payable shall be computed using the highest rate applicable for all instances.

Where Documents Are Revised

Where documents are revised after tax has been paid, and where the revisions result in higher payments, additional tax shall be levied on the incremental value.

Computing Tax Payable

In general, tax payable is calculated using the following formula:

Tax payable = Tax base × Applicable tax per unit

However, the tax base varies depending on the nature of the documents.

Value-Based Method

In general, the following formula shall be used to calculate the tax payable:

Tax payable = Tax base × Applicable rate

The tax base shall be the payment, fee, or revenue amounts indicated in the taxable documents.

Example

Enterprises A and B signed a purchase and sale contract, indicating a 2 million yuan purchase and sale. The applicable tax rate is 0.3%.

Tax payable = 2,000,000 yuan × 0.3% = 600 yuan

Quantity-Based Method

In general, the following formula shall be used to calculate the tax payable:

Tax payable = Tax base × Applicable rate

The tax base shall be the number of pieces of taxable documents involved.

Example

Excluding records on funds, an enterprise has 30 production and operation records, and various permits and licenses. The applicable tax per unit is 5 yuan per piece.

Tax payable = 30 pieces × 5 yuan per piece = 150 yuan

Exchange Rate Conversions

Where payment, fee, or revenue amounts indicated in the taxable documents are denominated in foreign currency, they should be converted into yuan for computation purposes, at the exchange rate quoted by the People's Bank of China (or at the rate computed in accordance with the relevant rules) on the date that the documents are signed.

REDUCTIONS AND EXEMPTIONS

Exemptions

The following documents may be exempt:

Loan Contracts

Interest-Free Loans

Exemptions may be granted for non-interest bearing or discounted loan contracts.

Preferential Loans from Foreign Sources

Exemptions may be granted for preferential loan contracts concluded between foreign governments or international financial institutions, and the Chinese government or State financial institutions.

Welfare-Related Documents

Exemptions may be granted for documents executed when property is donated to the government; to social welfare units supporting the widowed, the aged, the injured, or the handicapped; or to schools.

Others

  • Exemptions may be granted for duplicates or copies of documents on which tax has already been paid, excluding those used as original documents.
  • Exemptions may be granted for agricultural by-product purchase contracts concluded between State-designated purchase departments, and village committees or individual peasants.

Temporary Exemptions

Temporary exemptions may be granted for the following items:

Transfers of State Share Rights

Where free transfers of State share rights arise from the following circumstances, temporary exemptions may be granted:

  • The State Council and the People's Government at the provincial level approve or institute the separation of the government and enterprises; the reorganization of enterprises (groups); changes in the management systems of enterprises; or changes in the ownership of enterprises.
  • System changes occur in State enterprises, or changes occur in the asset inventories of State enterprises.

Others

  • Temporary exemptions may be granted for insurance contracts related to agriculture, forestry produce, or animals in animal husbandry.
  • Temporary exemptions may be granted for documents concluded between book, newspaper, and/or magazine publishing units, or between publishing units and the subscribing units or individuals.
  • Temporary exemptions may be granted for documents related to the purchase or sale of securities investment fund units by the investors.

PAYMENT PROCEDURES AND POLICIES

General Guidelines

Overall Procedure

In general, tax payable is computed by the taxpayer himself in accordance with prevailing tax laws. The taxpayer then purchases and affixes at one time the full quota of tax stamps (usually referred to as “stamping”).

Taxable documents should be stamped at the following times:

  • Contracts: When they are signed or executed.
  • Accounting records: When the records are first used.
  • Certificates, licenses: When they are received.

Special Instances

Single-Document Payments Exceeding 500 yuan

Where the tax payment on a single document exceeds 500 yuan, the taxpayers should apply to the local tax authorities for the tax payment certificate or tax completion certificate.

One copy of the certificate should be affixed to the document. Alternatively, the tax authorities may indicate on the document that the tax has been paid.

Frequent Stamping of Same-Type Documents

Where frequent stamping is necessary for documents of the same type, taxpayers may choose whether to pay tax on a consolidated basis over a specified period of time. The maximum period allowed is one month.

If they choose to pay on a consolidated basis, the taxpayers should inform the relevant local tax offices in advance.

Once determined, no change shall be allowed for one year.

Two Parties or More To the Same Document

Where a single document is signed by two or more parties (i.e., the enterprises, units, or individuals directly related to the document in terms of rights and obligations), and where each party is issued a copy, each party shall be responsible for affixing on its own copy the full quota of tax stamps due.

Where a party nominates a deputy, the nominated deputy shall bear the obligation of paying tax on behalf of the party concerned.

Tax stamps should be affixed on the taxable documents. They should then be sealed across the perforation between the two halves of each stamp by the taxpayers for cancellation or written off.

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