China Tax Authority Clarified Stamp Tax on Specific Contracts

To support the implementation of Stamp Tax Law, the Ministry of Finance and State Taxation Administration issued the following announcements at the end of June 2022, including:

• Announcement on the Policy Implementation Standards for Several Matters Relating to Stamp Tax (Announcement [2022] No. 22 of the Ministry of Finance and the State Taxation Administration, hereinafter referred to as “Announcement No. 22”)
• Announcement on Issues Relating to Transition of Preferential Policies following Implementation of the Stamp Tax Law (Announcement [2022] No. 23 of the Ministry of Finance and the State Taxation Administration, hereinafter referred to as “Announcement No. 23”)
• Announcement of the State Taxation Administration on the Implementation of the “Stamp Tax Law of the People’s Republic of China” and other related matters (Announcement [2022] No. 14 of the State Taxation Administration (Hereinafter referred to as “Announcement No. 14”)

Based on the provisions of the Stamp Duty Law, these announcements detail the handling of specific situations, clarify the tax collection, and resolve some controversial issues in the past implementation.

Stamp tax and sales contract

Sales contract is subject to stamp tax at 0.003 percent of the contract price. The sales contract here refers to the chattel sales contract and excludes the contract signed by individuals.

Announcement No. 22 clearly stipulates that “stamp tax shall be paid pursuant to the provisions where enterprises have entered into documents such as orders, demand lists, etc. which determine buyer and seller relationship and specify the rights and obligations of the buyer and the seller and have not entered into separate sale and purchase contracts.”

Therefore, taxable documents for stamp tax include not only contracts but may also cover other documents formed by transactions in the absence of a contract.

In practice, the scope of taxable vouchers should not be expanded to all vouchers generated in sales transactions. Taxpayers need to identify whether relevant vouchers fall into the taxable scope.

Meanwhile, if the documents are signed in electronic form, it is also taxable.

Stamp tax and agency contract

Agency contracts are agreements in which the agent acts for the principal for a specific purpose. For example, where Party A entrusts Party B to be the agent of its product for sales service, the agreement signed between Party A and Party B is agency contract.

Is stamp Tax required to sign a similar agency contract?

According to the accouchements, the agency contract signed between the agency unit and the entrusting unit is not a taxable document under stamp tax and the parties do not need to pay stamp Tax.

Stamp tax and carriage contract

Carriage contract includes freight contracts and multimodal transport contracts (excluding pipeline transport contracts). The stamp tax rate is 0.003 percent.

If it is multimodal transport of goods in the domestic and the whole freight is settled at the place of departure, the whole freight should be used as the tax calculation basis of the carriage contract, and the stamp tax shall be paid by both parties of the fright settlement of departure.

If the freight is settled by split-trip, the tax-calculated basis shall be the split-trip freight, and the stamp tax shall be paid by the parties handling the freight settlement respectively.

Stamp tax and loan contract

The scope of loan contract subject to stamp tax refers to the contracts signed by banking financial institutions, other financial institutions established with the approval of the Banking Regulatory Authority of the State Council, and borrowers (excluding interbank lending). The tax rate is 0.005 percent.

The loan contract signed between a company and the other company is not subject to stamp tax.

Whether the group fund pool arrangement needs to pay stamp tax, how to determine the taxpayer, and how to determine the taxable basis are controversial issues for a long time. Considering that there are various forms of fund pool arrangements, and the ways of signing contracts are not consistent, in practice, it is still necessary to further determine whether stamp tax needs to be paid according to the specific contract content.

Stamp tax and personal lease contract

For lease contracts signed by individuals, both parties are exempt from stamp tax.

Stamp tax and house sales contract

According to Announcement No. 23 when an individual sells or buys a house to or from an enterprise, only the individual is exempt from stamp Tax, and the enterprise still needs to pay the stamp tax at 0.005 percent of the price base on the property transfer document.

Stamp tax and technical consulting contract

A technical consulting contract is a contract concluded by the parties concerned with the analysis, demonstration, evaluation, prediction, and investigation of the relevant project. It includes:

• Soft scientific research projects related to the coordinated development of science and technology, economy, and society;
• Technical projects to promote scientific and technological progress and management modernization, and improve economic and social benefits; and
• Other professional items.

For contracts belonging to the above-mentioned content, stamp Tax shall be calculated according to the provisions of the tax item of “technical consulting contracts”. As for general legal, regulatory, accounting, and auditing advisory services, they are not technical consulting, and thus not subject to stamp tax.

Stamp tax and the contract signed abroad

Announcement No. 22 clearly stipulates below documents concluded outside the territory of the People’s Republic of China but used within the territory of the People’s Republic of China” are “taxable vouchers”, including:

• Where the subject matter of a taxable voucher is real estate which is in the territory of China;
• Where the subject matter of a taxable voucher is equity of a Chinese-resident enterprise;
• Where the subject matter of a taxable voucher is movables or exclusive rights to use trademarks, copyrights, patent rights or rights to use proprietary technologies, excluding movables or exclusive rights to use trademarks, copyrights, patent rights or rights to use proprietary technologies sold by overseas organizations or individuals to domestic organizations or individuals which are used completely overseas, and the seller or buyer is in the territory of China;
• Where the subject matter of a taxable voucher is services, excluding services provided by overseas organizations or individuals to domestic organizations or individuals which occur completely overseas, and the provider or the recipient of services is in the territory of China

For a “non-resident enterprise signing a contract overseas to transfer the equity of an overseas enterprise, which indirectly transfer the equity of a domestic enterprise”, even if it is considered to be subject to Chinese corporate income tax from the perspective of corporate income tax, both parties to the contract do not need to pay stamp tax.

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