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July 1, 2021

China announces new Stamp Duty Law

The Stamp Duty (SD) Law of the People’s Republic of China (the SD Law) was officially announced by the Standing Committee of the 13th National People’s Congress (NPC) on 10 June 2021.

The SD Law will become effective on 1 July 2022 and replace the prevailing SD Provisional Regulations. The SD Law contains 20 articles which cover the definition of taxpayers, taxable scope, SD rates, tax basis and preferential SD treatment. There are no fundamental changes made to the current SD system.

This Alert summarizes a number of the notable provisions.

SD rate on the transfer of trademarks, copyrights, patents and know-how

The SD rate on instruments for the transfer of trademarks, copyrights, patents and know-how will be reduced from 0.5% to 0.3%. This is an incentive to support and boost innovation activities of enterprises.

Preferential SD treatment on accounting records

The preferential SD rate of 0.025% (which was reduced from 0.05%) on paid-in capital and capital reserves recorded in the accounting books of an enterprise was originally promulgated in Caishui [2018] No. 50 (“Circular 50”, i.e., SD reduction and exemption on accounting records). Circular 50 also provides a SD exemption on dutiable accounting books. These preferential treatments have been adopted in the SD Law.

Value-added tax (VAT)

Pursuant to Article 5 of the SD Law, the dutiable amount of a taxable contract/instrument will exclude any VAT amount specified in such contract/instrument.

One potential issue is if the VAT amount is not specified in the taxable documents, the entire amount in the contract/instrument may be subject to SD without any deduction of VAT. To mitigate any controversy between taxpayers and tax authorities, it is important that taxpayers segregate the contract price and VAT amount in the taxable contract/instrument.

SD exemption for electronic orders between e-commerce businesses and individual buyers

Electronic orders between e-commerce businesses and individual buyers will not be dutiable transactions under the SD Law. In other words, for electronic orders between e-commerce business and individual buyers, both the seller and buyer are exempt from SD, while orders between e-commerce businesses and other buyers (e.g., entities, enterprises, etc.) will still be subject to SD.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

Ernst & Young Ernst & Young (China) Advisory Limited

Ernst & Young LLP (United States), China Tax Desk

Ernst & Young LLP (United Kingdom), China Tax Desk, London

Ernst & Young LLP (United States), Asia Pacific Business Group, New York


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