New tax treatment rules for financial products

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The State Administration of Taxation issued Bulletin [2013] No. 63 on 6 November 2013, effective as of 1 December 2013, to replace article 14 of Guo Shui Fa [2002] No. 92 (Notice 9) and provide an enhanced preferential business tax treatment on the sale of financial products.

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Under article 14 of Notice 9, sales of financial products were divided into four categories – stocks, bonds, foreign currencies and other financial products such as derivatives – and business tax was calculated separately for each category. The result was that companies could not offset gains in one category against losses in another.

Now, under Bulletin 63, sales of stocks, bonds, foreign currencies and other financial products will all be grouped together for the purpose of calculating business tax. The result is that companies now may offset gains from one type of financial product against losses from another type within a tax period. In addition, losses may be carried forward to the next tax period if within the same accounting year. Bulletin 63 will reduce the business tax burden on trading financial products.

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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com

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