Following the publication of Caishui  Circular No. 85
(hereinafter referred to as Circular No. 85):
Notice on Certain Issues Concerning Implementing Differential
Individual Income Tax treatments for Dividend and Bonus Obtained by
Individuals by Holding Shares in Listed Companies, on Sep. 7, 2015,
Ministry of Finance of People's Republic of China, State
Administration of Taxation and China Securities Regulatory
Committee again jointly issued  Circular No. 101 (hereinafter
referred to as Circular No. 101): Notice on Certain Issues
concerning Differential Individual Income Tax Treatments for
Dividend and Bonus Obtained by individual by Holding Shares in
Listed Companies to clarify individual income tax treatment for
dividend and bonus obtained by holding shares in listed companies.
This adjustment of policy intends to bring the guiding role of
taxation policy into better play, encourage long-term investment,
restrain short-term speculation and promote the long-period
stability and prosperity of the national capital market.
Key points of Circular No. 85
Compared with Circular No. 85, Circular No. 101 has introduced
the following new tax preferences:
The practical details would be the same as these outlined in
Circular No. 85.
The Circular No. 101 would be applicable to the shares obtained
and registered later than 8 Sep, 2015. If the shares are already
recorded in an individual investors' securities account on the
effective date of this circular, the holding period shall be
calculated from the date of obtaining the shares.
Our observations and suggestions
1. During the past three years, Circular No. 85 has been
practiced and afforded rich experiences for launching Circular No.
101. Compared with Circular No. 85, we noticed that Circular No.
101 differs in the following aspects:
Provide further IIT exemption on dividend derived from shares
held for more than one year (not included);
Clarify IIT preference on dividend would also applicable to the
shares listed on National Equities Exchange and Quatations;
Simplify the taxation process for the shares held for less than
one year (included)
2. The introduction of Circular No. 85 and No. 101 shall not
affect the IIT exemption on income due to transfer of shares in
3. With more tax exemption available for IIT on dividend, we
would suggest the investors and the taxpayers to perform efficient
and practical planning when disposing their assets to mitigate the
tax burden while stay compliance with the tax regulations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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