China Tax/Business News Flash

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May 2015, Issue 19

Tax payment by instalments - China's new tax policy on investment by individuals with non-monetary assets


In March 2015, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly released the <Notice Regarding IIT Treatments for Investment with Non-monetary Assets by Individuals> (Caishui [2015] No.41 or "Circular 41”). In April 2015, the SAT further released the <Public Notice Issued by the SAT Regarding IIT Collection and Administration on Income from Investment with Non-monetary Assets by Individuals> (the SAT Public Notice [2015] No.20 or “Public Notice 20”) and its explanatory note (the “explanatory note”). Circular 41 and Public Notice 20 (the “New IIT Policy”) clarify the relevant IIT matters (including applicable scope, rights and obligations of each party, timing of taxation, taxation base, tax calculation and payment by instalments etc.) in connection with investment by individuals with non-monetary assets. The highlight of the New IIT Policy is that taxpayers are allowed to amortise the gain arising from the asset appreciation in the non-monetary assets over a period of up to five years starting from the day the tax liability arises and this, to a certain extent, will relieve the cash flow pressure on taxpayers. Individual investors shall pay attention to complying with the New IIT Policy and plan ahead for the potential investment by non-monetary assets.

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