China Stamp Duty Law Updated

In June 2021, China’s Standing Committee of the People’s Congress promulgated Presidential Decree #89 (Decree 89), an upgraded version of the Stamp Duty Law of the People’s Republic of China. This is the first stamp duty law update since 1988, and it will become effective as of July 1, 2022. While the basics of stamp duty payment procedures remain mostly unchanged, the law has been amended to include a wider range of both taxpayers and the types of transactions or documents that are subject to stamp duty.

Prior to the July 2022 enactment of this Decree 89 law, Chinese entities or individuals (including foreign-invested companies or foreign individuals) concluding or receiving taxable documents as specified in the 1988 rules are obligated to pay the relevant stamp duty and affix the appropriate stamps to the documents. Taxable documents include all manner of contracts, purchase & sale agreements, property leases and insurance, loan agreements, property title transfers, documentation of use licenses or rights, and business accounting books.

Now under Decree 89, two new categories of stamp duty taxpayers have been explicitly included. That is, once the new law is effective, not only will entities or individuals conducting securities transactions in China be required to pay stamp duty (the transferor of securities is the liable party), but entities or individuals outside of China who enter into contracts and agreements of a stamp dutiable nature with entities inside China will also be subject to stamp duty. Where a foreign party is liable for stamp duty, the Chinese party to the agreement shall act as the withholding agent and ensure that the proper stamps are purchased and affixed to the documentation. If there is no party in China who can act as withholding agent, the foreign party must pay the tax directly. To date, it is not clear how this might be accomplished since tax bureaus typically cannot accept payments directly from overseas. It is expected that clarifying provisional rules will be released prior to the effective date.

Stamp duty exemptions have also undergone significant change under the new law. The list has been expanded to include not only duplicates of previously-stamped documents and documentation of property donations to government entities, but also taxable documents issued by foreign embassies or consulates in China, agriculture-related contracts to which a farmer is a party, non-interest-bearing loan contracts, purchase agreements for drugs or sanitary materials by non-profit medical organizations, and documentation of electronic orders entered into by individuals and e-commerce operators.

Additionally, Decree 89 more clearly defines how the stamp duty for a given transaction/contract is to be calculated. The stamp duty basis for most taxable contracts shall be the amount specified in the contract, less any applicable VAT. This is the same for taxable property transfer documents and the like. In general, where a transaction amount, and thus the stamp duty basis, is not determinable from the contract, current market pricing must be used as the basis. For business accounting books, the stamp duty basis shall be the total of the paid-in registered capital plus the capital reserves. In the case of securities transactions, either the transaction amount, the closing price on the effective date of the transaction, or the par value of the securities shall be the basis, depending on which is available. In some cases, the stamp duty rates have changed as well. See Table 1 below for a summary comparison of rates under the old 1988 law versus the new Decree 89 law. Categories that have changed are highlighted in blue.

Table 1: 1988 Law Versus New Law Comparison of Stamp Duty Rates

China Stamp Duty July 2022

In conclusion, stamp duty has typically not received the same high level of attention that has been given to other taxes (e.g. Corporate Income Tax or Value-Added Tax), especially by foreign individuals or foreign-invested entities in China. As a result, such entities have not always been in compliance with the regulations, and some have experienced surprise penalties when submitting certain documents to government agencies (e.g. service agreements submitted as tax deductible expenses). Failure to pay stamp duty and affix cancelled stamps to taxable documents can carry substantial penalties, so it is important for foreign investors to understand the relevant rules before conducting any business as a registered company or representative office in China. And under the new law, it is now also important that overseas entities wishing to conduct contracted services or other stamp taxable transactions in China include consideration of stamp duty in the transaction planning stages to ensure compliance with Decree 89. As always, a tax professional in China should be consulted as early as possible when contemplating doing any business in China. CLA Global TS Shanghai Ltd continues standing by to assist.


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