Notice of Ministry of Finance, State Administration of Taxation and China Securities Regulatory Commission concerning Enterprise Income Tax Exemption on Capital Gains from Domestic Share Transfer by QFII and RQFII (Caishui [2014] No.79) (财政部、国家税务总局、证监会关于 QFII 和 RQFII 取得中国境内的股票等权益性投资资产转让所得暂免 征收企业所得税问题的通知)

On October 31, 2014, the Ministry of Finance (the “MoF”), the State Administration of  Taxation (the “SAT”) and the  China Securities Regulatory Commission (the “CSRC”) jointly released tax circular Caishui [2014] No. 79 (“Circular 79”) in relation to the taxation of the Qualified Foreign Institutional Investor (“QFII”) and the Renminbi Qualified Foreign Institutional Investor (RQFII).

QFII and  RQFII are the foreign institutional investors qualified  to invest in Renminbi (“RMB”) denominated capital market (i.e. RMB denominated “A shares” listed in the Shanghai and Shenzhen Stock Exchanges).

The main highlights of Circular 79 are as follows:

  • Starting November 17, 2014, the QFII and the RQFII generating capital gains from domestic share transfers, enterprise income tax (the “EIT”) exemption shall apply. Capital gains generated by QFII and RQFII before November 17, 2014 are subject to EIT in accordance with the law.
  • The above EIT exemption policy is applicable to QFII and RQFII which do not have an establishment or a place of business in China or whose capital gains mentioned above  are not attributable to an establishment or a place of business in China.

Date of issue: October 31, 2014. Date of effectiveness: November 17, 2014.