24 Stamp Tax
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.
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.
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.
Units that handle the delivery of share titles should withhold tax related to the stock transactions.
What Constitutes a Taxable Document
Where documents are executed or received in the course of economic activities, they are deemed to be taxable documents.
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.
- 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 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.
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 contracts||Contracts 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 contracts||Contracts 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 projects||Survey and design contracts.||0.05% of the receipts.||Parties to the contract.|
|4. Construction, installation, and engineering contracts||Construction, installation, and engineering contracts.||0.03% of the contracted amount.||Parties to the contract.|
|5. Property leasing contracts||Contracts 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 contracts||Contracts 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 contracts||Warehousing and storage contracts.||0.1% of the warehousing and storage fees.||Parties to the contract.|
|8. Loan contracts||Contracts 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 contracts||Contracts for: Property insurance; responsibility; surety; credit.||0.003% of the insurance premium.||Parties to the contract.|
|10. Technology contracts||Contracts for: Technology development or transfer; consulting; services. Similar contracts.||0.03% of the indicated amount.||Parties to the contract.|
|11. Property transfer documents||For transfers of: Property ownership; copyright; trademarks; patents; licensing. Similar transfer documents.||0.05% of the indicated amount.||Parties executing the documents.|
|12. Business accounting documents||Accounting 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 licenses||Government-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%.
- Gifting of shares publicly listed by the shareholding enterprises.
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.
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.
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.
Where tax payable amounts to less than 0.1 yuan, no tax shall be levied.
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.
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.
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.
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
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.
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.
The following documents may be exempt:
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.
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.
- 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 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.
- 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.
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.
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.
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.