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China Retains Income Tax Break for Funds

China has issued a reminder that mutual funds are exempted from corporate tax in order to encourage development of the investment sector.

China, Chinese Flag
CNBC.com
China, Chinese Flag

The Ministry of Finance and the State Administration of Taxation jointly issued rules late on Wednesday restating that various securities-related activities enjoy a temporary exemption from corporate income tax, including income on stock and bond trading and dividend income.

The rules are posted on the tax bureau's Web site, www.chinatax.gov.cn.

However, officials from both the tax administration and the securities watchdog told Reuters that the circular extends existing rules and is not a new regulation.

"Given that the unified foreign and domestic tax regime was put in place at the beginning of the year, we're just reiterating some of our polices in case people are worried that some of them will also be changed," one official said.

The Ministry of Finance's Web site mentions the exemption as far back as Jan. 1, 2004.

China's regulators have recently stepped up approvals of new funds in a bid to bolster the slumping domestic share market, which has retreated nearly 40 percent from a record high reached last October.

Optimism over possible government moves to bolster the market helped Chinese stocks on Wednesday to snap a five-day losing streak that had knocked more than 10 percent from Shanghai's benchmark index.

However, on Thursday the index was nursing early losses of more than 3 percent.