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Change of stamp duty rules
The State Administration of Taxation ("SAT") issued a tax circular Caishui [2006] 162 ("Circular 162") on 27 November 2006 regarding the new stamp duty treatment on certain dutiable documents.
E-Contracts
The circular delivers an important message that stamp duty will be levied on dutiable documents concluded electronically.
Prior to the release of Circular 162, stamp duty is only levied on paper documents that fall within the 13 taxable categories under the current stamp duty regulations. Purchase orders confirmed via phones and emails were temporarily exempted from stamp duty based on a tax circular issued by the SAT in 1997 provided that they were not being printed out. Thus the use of e-contracts has always been an efficient way to reduce stamp duty cost.
However, with the enforcement of Circular 162, companies may have to file stamp duty on dutiable documents concluded via e-mail. Nevertheless, orders confirmed verbally such as via phones are still not taxable for stamp duty purpose.
Transfer of land use right
Under Circular 162, stamp duty is levied on contracts for transfer of land use right.
This also indicates a change from the previous interpretation made by SAT in 1991 whereby contracts relating to transfer of land use right are excluded from the scope of stamp duty.
Uncertainties
There are still uncertainties as to the implementation and interpretation of Circular 162 such as the following:
- Effective date of the circular is not specified in the circular. It is possible that the local PRC tax authorities may apply the rules on all relevant dutiable documents concluded on and after 27 November 2006; and
- The circular does not clarify the definition of "electronically". If considered broadly, all orders sent and confirmed via emails will be captured under this circular. It is also unclear whether sales/purchase transactions made through e-commerce platforms will be considered taxable for stamp duty purpose.
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Download our China Tax/Business News Flash (Dec 2006, Issue 24) (pdf file, 148KB) for your reference.
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