China announced tax breaks for investors of overseas-listed innovative companies’ Chinese depositary receipts

 

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China announced tax breaks for individuals and institutions that invest in overseas-listed innovative firms’ Chinese depositary receipts (CDRs), as part of efforts to support the return of overseas-listed Chinese technology companies.

The authorities aims to continuously support China’s innovation-driven development and further implement the pilot program to support innovative companies’ domestic listing and issuance of CDRs, said the Ministry of Finance, the State Taxation Administration and the China Securities Regulatory Commission (CSRC) on Tuesday.

The tax benefits will be available from September 21, 2023 to December 31, 2025.

For domestic individuals, any profit made on the transfer of the CDRs will be tax-exempt in China and any taxes paid overseas on dividends will be credited by the Chinese authorities.

Domestic corporate investors don’t need to pay taxes in China on profits from the transfer of the CDRs and dividends and bonuses obtained by holding the CDRs. 

The move aims to continuously implement the pilot program to support the domestic issuance of innovative firms’ CDRs. The country started the pilot program in 2018, in a bid to pave the way for the domestic flotation of overseas-listed Chinese tech giants. 

The pilot program covers companies in the high-tech or strategic emerging industries such as the digital economy, big data, cloud computing, artificial intelligence, software and integrated circuits, as well as high-end equipment manufacturing and biological medicine, the CSRC said at the time.