Stamp Duty in China

China's stamp duty serves as a transaction tax levied on specific written documents, encompassing contracts, property transfers, and securities transactions. This taxation mechanism ensures that various legal and commercial agreements contribute to the nation's fiscal revenues.

Contributing Advisor

Hannah Feng

Partner

The foundation of China's stamp duty system was established with the enactment of the Interim Regulations on Stamp Duty in 1988. These regulations outlined the initial framework for taxing certain documents and transactions. Over the years, as China's economy expanded and diversified, the need for a more comprehensive legal structure became evident. This led to the introduction of the Stamp Duty Law, which reflects the evolution of China's economic landscape and the necessity for updated tax legislation.

The stamp duty has significant implications across various sectors:

• Capital markets: In an effort to bolster investor confidence and stimulate market activity, the Ministry of Finance announced a reduction in the stamp duty on securities trading from 0.1 percent to 0.05 percent. This move aims to lower transaction costs and encourage greater participation in the stock market.
• Real estate: Property transactions, including the transfer of land use rights and ownership of buildings, are subject to a stamp duty rate of 0.5 percent of the transaction value. This taxation influences investment decisions in the real estate sector, affecting both developers and individual buyers.
• Cross-border transactions: The Stamp Duty Law stipulates that contracts executed outside China are still taxable if they pertain to assets or entities within the country. For instance, transferring equity in a Chinese resident enterprise or real property located in China falls under the stamp duty's purview, ensuring that cross-border transactions contribute appropriately to tax revenues.

Overview of China’s stamp duty framework

China’s stamp duty framework functioning as a transaction tax applied to a diverse range of documents and agreements. This tax is ensuring that formalized business and legal transactions contribute to the nation’s revenue stream while also promoting transparency and accountability in contractual dealings.

China’s system categorizes taxable transactions into several key segments:

• Business contracts: This category encompasses a wide array of commercial agreements, including sales contracts, leasing arrangements, loan agreements, and insurance policies. By imposing a stamp duty on these documents, the government underscores the importance of formalized transactions in maintaining orderly commerce.
• Property rights transfers: The framework extends to transfers of property rights, which include not only real estate transactions but also the transfer of intellectual property and equity interests. This broad approach ensures that both tangible assets, like land and buildings, and intangible assets, such as patents and copyrights, are subject to regulatory oversight.
• Securities transactions: In the realm of capital markets, stamp duty is levied on transactions involving stocks and bonds. This facet of the tax framework is designed to moderate market speculation while simultaneously generating fiscal revenue, thus reinforcing market stability.

Comparison to global stamp duty models

When contrasted with the stamp duty systems employed by many OECD countries, China’s approach stands out for its specificity and integrated design. While several OECD nations impose stamp duties primarily on real estate or high-value transactions, China has adopted a more comprehensive model that covers a wider spectrum of contractual and financial activities. This broader scope reflects China's dual objective: not only to raise revenue but also to ensure that all significant legal and commercial exchanges adhere to established regulatory standards.

Moreover, while some OECD countries have gradually shifted away from traditional stamp duties—often in favor of alternative transaction taxes—China has maintained and even refined its framework to address the unique demands of its rapidly evolving economy. The Chinese model is carefully calibrated to balance revenue generation with the need to foster a dynamic business environment, ensuring that tax obligations do not unduly burden commercial activity while still promoting fiscal responsibility.

How to calculate stamp duty?

*As compared to the Interim Measures and the relevant amendments to the Interim Measures.

** This was first provided in Cai Shui [2018] No.50, which reduced the stamp tax rates for this item from 0.05%.

***The stamp tax rate on security transactions was halved from 0.1 percent to 0.05 percent starting from August 28, 2023.

Under the new Stamp Tax Law, the stamp tax is solely based on amount. The formula for calculating stamp tax is:

TAX PAYABLE = AMOUNT OF PAYMENT (OR FEES OR REVENUE) INDICATED IN TAXABLE DOCUMENTS X APPLICABLE RATE

Compliance and regulatory considerations

China’s stamp duty law mandates that any contract or certificate executed within China’s territory—regardless of whether the contracting party is domestic or foreign—is subject to stamp duty. 

This means that foreign enterprises engaging in activities such as mergers, acquisitions, or other contractual arrangements in China must comply with local tax requirements. In many cases, these companies are required to appoint a domestic authorized agent to handle withholding responsibilities, ensuring that tax remittances are managed efficiently and transparently.

To deter evasion and promote rigorous adherence to the law, the Stamp Duty Tax Law enforces stringent penalties for non-compliance. Violators may face fines that could be as steep as 30 times the amount of the unpaid tax. In addition, multinational corporations operating in China must be prepared for heightened audit risks, as tax authorities actively monitor cross-border and domestic transactions. These enforcement measures reflect the government’s determination to safeguard fiscal integrity and ensure that all entities—domestic and international—operate on a level playing field.

Investment implications of stamp duty reforms

Capital markets

The reduction in stamp duty on securities transactions has proven to be a catalyst for increased trading activity and improved market liquidity. By lowering the transaction costs, the reforms have not only encouraged a more vibrant domestic market but have also attracted heightened foreign interest in Chinese equities. Investors worldwide are increasingly viewing these measures as a signal of China’s commitment to maintaining an open and dynamic capital market, thereby enhancing overall investor confidence.

Real estate & infrastructure investments

In the real estate sector, a reduced stamp duty on property transfers has opened up new avenues for investment. Lower fees translate into decreased overall transaction costs, making property investments more appealing for both individual buyers and large-scale developers. This easing of financial burdens extends to infrastructure and industrial projects as well, where streamlined tax obligations foster an environment conducive to expansive development. As China continues to prioritize modernization and infrastructure growth, these reforms are likely to accelerate investment in sectors critical to the country’s long-term economic strategy.

E-commerce & digital economy

Recognizing the transformative impact of digital technology, China’s stamp duty reforms have also extended preferential treatment to the digital economy. Exemptions for digital contracts and online transactions are designed to support tech-driven enterprises and cross-border e-commerce firms entering the Chinese market. By adopting a more favorable tax structure for digital operations, the government is not only promoting innovation but also integrating China more deeply into the global digital marketplace. These measures facilitate smoother international transactions and reinforce China’s position as a key player in the evolving digital economy.