Announcement on Clarifying VAT Policies for Free Transfer of Shares and Other Activities
Announcement [2020] No. 40 of the Ministry of Finance and the State Taxation Administration
Announcement is hereby made on value-added tax ("VAT") policies for free transfer of shares etc. as follows:
I. When a taxpayer transfers shares free of charge, the transferor shall, by taking the purchase price of the shares as the selling price, compute and pay value-added tax as per "transfer of financial products"; when the transferee re-transfers the aforesaid shares, it shall compute and pay VAT as per "transfer of financial products" by taking the sale price of the original transferor as the purchase price.
II. With effect from 20 August 2019, the financial institution may opt to adopt the market quoted interest rate for loans with a term of one year or the market quoted interest rate for loans with a term of more than five years announced by the National Interbank Lending Center with authorisation of the People's Bank of China for the small loans with a term of more than one year (excluding one year) but less than five years (excluding five years) granted by it to small enterprises, micro enterprises and individually-owned businesses, and its interest income derived from such loans is entitled to the VAT exemption policy stipulated in the Notice of Ministry of Finance and State Taxation Administration on Exemption of VAT on Interest Income of Financial Institutions from Loans to Small and Micro Enterprises (Cai Shui [2018] No. 91).
III. Where a land owner acquires land pursuant to the law, and pays compensation to the land user for the land and related tangible movables and immovables, this falls under the circumstances stipulated in item (37) of Article 1 of the Provisions on Transitional Policies for the Pilot Scheme of Levying VAT in Place of Business Tax (Cai Shui [2016] No. 36) where the land user returns the land use right to the land owner.
IV. This Announcement shall be implemented with effect on the date of promulgation. Any matter that has occurred previously but has not been handled shall be handled in accordance with the provisions of this Announcement.
This Announcement is hereby given.
Ministry of Finance
State Taxation Administration
29 September 2020
