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China Proposes 10% Capital Gains Tax

April 30, 2015

A flood of net asset “clawbacks” is the expected result of China’s proposal of a 10% capital gains tax on foreign investments.

Investors who have traded stocks and other equity based instruments through China’s two biggest portfolio investment schemes for foreigners will be imposed with a 10% capital gains tax, China announced recently. The tax will take 10% of investors’ share trading profits without considering any trading losses.

Expectations

Analysts expect that the new tax will result in:

  • Net asset value “clawbacks” by fund managers (recovery of funds already disbursed)
  • Redemptions from QFII funds as investors try to bolt before the tax clawbacks.

Any investors in either the Qualified Foreign Institutional Investor (QFII) program or the renminbi-denominated (Chinese currency) version of the same program (RQFII) who joined between November 17, 2009 and November 16, 2014 will be subject to the tax. For more information on the capital gains tax, and its proposed effects, read our article “China Takes Hard Line on Taxing Foreigners on Share Gains”.

Questions? Contact any member of our Global Tax Services Team.

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