1. Regarding the shares of listed companies acquired by individuals at public offering and transfer markets, for shares held for less than one month (including one month), the total dividend is subject to 20% income tax; for shares held for between one month and one year (including one year), the total dividend is temporarily subject to 50% of the 20% income tax; for shares held for more than one year, the total dividend is temporarily subject to 25% of the 20% income tax.
The listed companies mentioned above refer to listed companies listed for trading at Shanghai Stock Exchange and Shenzhen Stock Exchange; the holding period refers to the time duration from the day the individual acquired said stock of a listed company at public offering and transfer markets to the day before the transfer and delivery of said stock.
2. When the listed companies are paying dividend, for individuals whose holding period is more than one year as of the equity registration date, only 25% of their dividend should be taxable income and subject to the 20% tax rate. For individuals whose holding period is under one year (including one year) as of the equity registration date and who has not yet transferred the shares, the tax will be withheld and remitted in two steps: first, when the listed company is paying dividend, 25% of the dividend will temporarily be calculated as the taxable income and the amount of tax withheld will be calculated accordingly. Second, when the individual is transferring shares, the securities depository and clearing company will calculate the actual taxable income based on the holding period of the shares. The extra amount payable will be withheld from the individual account by share custodians such as securities firms and remitted to the securities depository and clearing company, which will then remit the extra amount to the listed company within five working days the following month. Upon receiving the tax, the listed company should declare the tax paid to supervisory taxation administration within the statutory declaration period in the same month.
The individual should ensure adequate funds in the personal account and fulfill statutory tax obligation. Share custodians such as securities firms should remit the tax paid by the individual in compliance with the law. When the individual fund account lacks fund or adequate funds, share custodians such as securities firms should first inform the individual to recover funds and then remit the corresponding amount of tax payable.
3. Regarding the individual transfer of shares, the holding period is based on the FIFO principle. That is the shares acquired first are regarded as the shares transferred first.
The taxable income is calculated using the securities account of an individual investor as the basic unit. The amount of shares held refers to the shareholding record of the securities account of the individual investor after the end of the day settlement every day. The number of shares acquired or transferred by the securities account refers to the net increase (decrease) in the number of shares after the end of the day settlement.
4. For the limited shares of listed companies held by individual investors, the dividend obtained after the restriction is lifted will be subject to income taxation policy stipulated in this notice. In this case, the holding period will be calculated from the day the restriction is lifted; the dividend obtained before that day will be subject to 50% of the 20% income tax.
The limited shares mentioned above refers to the limited shares specified in the (2009) 167 and (2010) 70 documents by the Ministry of Finance and the State Administration of Taxation.
5. The dividend obtained by securities investment fund from listed companies will be subject to individual income tax stipulated in this notice.
6. In this notice, the shares of listed companies acquired by individuals at public offering and transfer markets refer to the followings:
1) Shares acquired through centralized trading system of or block trading system at Stock Exchanges;
2) Shares acquired through transfer agreements;
3) Shares acquired due to judicial deduction;
4) Shares acquired due to inheritance or division of family wealth in compliance with the law;
5) Shares acquired through acquisition;
6) Shares acquired through warrant execution;
7) Shares acquired from convertible bonds;
8) Shares acquired from issuance, rights issuance, conversion of dividends and reserved funds
9) Holding shares that were transferred from share transfer system to Main Board markets (or SME Board, GEB);
10) In case of a merger of listed companies, holding shares converted from shares of the original companies to shares of the merger;
11) In case of the division of a listed company, holding shares converted from shares of original company to shares of the newly separated companies;
12) Other shares acquired at public offering and transfer markets.
7. In this notice, share transfer refers to the following:
1) Share transfer through centralized trading system or block trading system at securities exchanges;
2) Share transfer through transfer agreement;
3) Shares held get judicial deduction;
4) Assignment of share ownership due to inheritance, contribution or the division of family wealth;
5) Contract acquisition through shares;
6) Share transfer to the third party which offers cash option by executing cash option;
7) Use share to purchase or subscribe ETF
8) Other situations that are in the nature of transfer.
8. The year (month) mentioned in the notice refers to natural year (month). In other words, holding shares for one year refers to continuously holding shares from certain date the previous year to the day before the same date the current year, holding shares for one month refers to continuously holding shares from certain day of the previous month to the day before the same date the current month.
9. Administrations including the Ministry of Finance, the State Administration of Taxation and the CSRC should reinforce coordination and cooperation among themselves, effectively implementing new policies.
Share custodians including listed companies, securities depository and clearing companies and securities firms should actively cooperate with the taxation administration to facilitate the implementation of the new income tax scheme on dividend.
10. The notice will come into effect on January 1 2013. Regarding the dividend paid by listed companies, for those whose equity registration date is later than January 1 2013, the dividend is subject to the statements in this notice. As for shares of listed companies already held in the securities account of individual investors prior to January 1 2013, the share holding period shall be calculated from the day the shares were acquired.
On the day when this notice comes into effect, both the Notice of the Ministry of Finance and the State Administration of Taxation on Relevant Policies Regarding Individual Income Tax on Dividend (the Ministry of Finance, the State Administration of Taxation (2005) No.102) and the Complementary Notice the Ministry of Finance and the State Administration of Taxation on Relevant Policies Regarding Individual Income Tax on Dividend (the Ministry of Finance, the State Administration of Taxation (2005) No.107) will be abolished.
The Ministry of Finance The State Administration of Taxation The CSRC
November 16 2012