The New Stamp Duty Law also Reduces the IP Costs

On June 10, 2021, the new Stamp Tax Law of the People’s Republic of China (中华人民共和国印花税法) was passed by the National People’s Congress. It will reduce or even eliminate the stamp tax previously levied on certain legal documents, licenses or certificates issued by an administrative authority. The new law replaces the previous Transitional Stamp Tax Regulations of 1988, which were last amended in 2011.

The Stamp Tax Law applies not only to documents related to purchase and sale transactions, loans, technology contracts, business books, etc., but also to all documents on the transfer of the exclusive right to use a trademark, copyright, patent right or know-how. For these transactions related to intellectual property, the stamp duty will be reduced from 0.05% to 0.03%, while the stamp duty for patent grants (RMB 5) will be completely abolished.

These do not seem to be large amounts. However, since the tax is calculated based on the price listed in each contract, it can add up in cases where very valuable patents are transferred. The tax is calculated in RMB, foreign currencies must be converted accordingly. If the tax payable is not more than RMB 0.1, it will not apply at all. 

Although stamp tax is usually not a major expense for most companies, it should not be neglected. Companies that pay too little stamp tax or do not pay it at all will not only face a fine. They will also receive a low score in the Corporate Social Credit System, which can lead to increased inspections and tax audits. An A-taxpayer rating, on the other hand, results in fewer audits and preferential treatment by the tax authorities.

Picture: National People’s Congress

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