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China announces tax breaks for trading of depositary receipts

[SHANGHAI] China's finance ministry published preferential tax rules on Friday designed to support domestic floatation of overseas-listed Chinese tech firms.

The Ministry of Finance announced tax breaks for both retail and institutional investors involving future trades in China depositary receipts (CDRs), according to a statement on the ministry's website.

In June 2018, China published rules allowing foreign-listed Chinese companies to issue CDRs in China, modeled on the popular ADRs used in the United States.

But so far, no company has issued CDRs, the closest one being smartphone maker Xiaomi Corp, which in June postponed a planned listing on the domestic market though it went ahead with an initial public offering in Hong Kong as planned.

According to the finance ministry, individual investors would be exempt from personal gains tax for three years on profit from trading CDRs, while they will also receive preferential tax treatment regarding dividend income during the same period.

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Institutional investors will be exempt from corporate taxes on gains from both dividends and trading CDRs, according to the statement.


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