China does not have a standalone capital gains tax. Instead, the China capital gains tax rules sit inside the Individual Income Tax (IIT) and Corporate Income Tax (CIT) systems: individuals generally pay a flat 20% on the net profit from selling property, companies pay the standard 25% CIT rate on gains rolled into ordinary business income, and gains from listed A-shares are exempt from IIT altogether.1Guangdong Provincial Tax Service. Individual Income Tax Law of the People’s Republic of China What you actually owe depends on what you sold, who you are, and where you are resident.
The 20% Rate for Individuals
Article 3 of the Individual Income Tax Law taxes income from the transfer of property at a flat 20%.1Guangdong Provincial Tax Service. Individual Income Tax Law of the People’s Republic of China Chinese tax residents pay this on their worldwide gains; non-residents pay it only on China-sourced gains. The rate covers privately held equity, unlisted shares, partnership interests, and other non-publicly-traded assets.
The taxable amount is the sale price minus your original cost and reasonable transaction expenses such as brokerage fees or legal costs. Keep documentation of what you paid. Without it, the tax authority can impute a cost basis, and the imputed figure rarely favors the seller.
Listed Stocks: Exempt From IIT, Not From Tax
Gains from selling shares listed on the Shanghai, Shenzhen, or Beijing stock exchanges are exempt from IIT for individual investors. The exemption is one of the more investor-friendly features of the Chinese system, and it has been in place for years. It does not extend to private equity, pre-IPO shares, or restricted stock that hasn’t yet floated.
Stock trading is not tax-free, though. China imposes a stamp duty on securities transactions, payable only by the seller. The statutory rate is 0.1% of the transaction value, halved to 0.05% since August 2023 as a market stimulus measure.2The State Council of the People’s Republic of China. China Halves Stamp Duty on Stock Trading to Invigorate Capital Market On a RMB 1 million sale, that is RMB 500. Active traders should build it into their expected returns.
Corporate Gains at 25%, or Less
For tax-resident enterprises, there is no separate capital gains category. Gains from selling equity, fixed assets, or land use rights are lumped in with all other business income at the 25% CIT rate. Resident enterprises are taxed on worldwide income, so offshore disposals count too.3Zhejiang Provincial Tax Service. Enterprise Income Tax Law of the People’s Republic of China The taxable gain is the sale proceeds minus the asset’s book value and related transaction costs.
Two preferential regimes can bring the rate down and, because there is no separate gains bucket, they apply to capital gains as well:
- High and New Technology Enterprises (HNTEs) that qualify through a formal assessment of their R&D activities and IP ownership apply a reduced CIT rate of 15%.
- Small and low-profit enterprises face an effective CIT rate of just 5% on annual taxable income up to RMB 3 million, a policy in effect through December 31, 2027. Qualification requires fewer than 300 employees and total assets below RMB 50 million.4The State Council of the People’s Republic of China. China Rolls Out New Tax Cuts for Small Businesses
A qualifying HNTE that sells an investment at a profit pays 15% on that gain, not 25%.
Real Estate Sales: Multiple Taxes Stack
Selling real property in China triggers more than IIT or CIT. The distinctive layer is Land Appreciation Tax (LAT), a progressive levy on the increase in land value when state-owned land use rights and the buildings on them change hands.
Land Appreciation Tax
LAT uses four tiers, keyed to the ratio of appreciation to total deductible items. Each tier applies only to the portion of appreciation within its bracket:
- 30% where appreciation does not exceed 50% of deductible items
- 40% where appreciation exceeds 50% but not 100%
- 50% where appreciation exceeds 100% but not 200%
- 60% where appreciation exceeds 200%
Deductible items include the original price paid for the land use right, development costs, and taxes paid during the transfer. The appreciation amount is the sale price minus all deductible items. LAT itself is deductible against your IIT or CIT liability on the remaining gain.
Developers selling ordinary residential housing where appreciation does not exceed 20% of deductible items are exempt from LAT. Individual homeowners selling a family’s sole residence held for five or more years are generally exempt from IIT on the gain, though local regulations set the exact procedure and it varies by city.
VAT and Deed Tax
Individuals selling real estate held for less than two years also owe VAT at 5% of the sale price. Properties held longer may qualify for a reduced rate or exemption depending on the city and property type. Deed tax, paid by the buyer, typically runs between 1% and 3%. Between LAT, IIT, VAT, and deed tax, the total burden on a profitable sale is substantial, and sellers who don’t model it in advance often misjudge their net proceeds.
Non-Residents and China-Sourced Gains
Non-residents owe Chinese tax only when the gain is “China-sourced,” meaning it comes from selling equity in a Chinese company or transferring real property located in China.
Non-Resident Enterprises
A non-resident enterprise without a permanent establishment in China pays a 10% withholding tax on China-sourced capital gains. The statutory rate under the Enterprise Income Tax Law is 20%, reduced to 10% on a concessionary basis under the Implementation Regulations. The 10% applies to the gross gain. An applicable double taxation agreement may reduce or eliminate the Chinese tax, but the enterprise has to invoke the treaty and submit supporting documentation to claim relief.
Non-Resident Individuals
Non-resident individuals face the same 20% flat rate that applies to residents, applied to China-sourced gains only.1Guangdong Provincial Tax Service. Individual Income Tax Law of the People’s Republic of China China has treaties with more than 100 countries. Most follow a pattern where gains from selling shares in a company that derives more than a set percentage of its value from immovable property remain taxable in China, while other share disposals may be taxed only in the seller’s home jurisdiction.
Foreign Investors in Chinese Stocks
Foreign institutional investors accessing A-shares through the QFII and RQFII programs have benefited from a temporary CIT exemption on gains from transferring shares and equity assets in China since November 2014. Mainland investors trading Hong Kong-listed stocks through the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs get a similar temporary IIT exemption, currently extended through December 31, 2027.5State Taxation Administration. Announcement on Extension of the Individual Income Tax Policy With Respect to Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Exchange Connectivity Mechanisms Both policies are formally temporary, so investors with large positions should track the renewal dates.
Indirect Transfers Under Circular 7
China can tax offshore transactions that are really just indirect sales of Chinese assets. State Taxation Administration Announcement No. 7 of 2015, known as Circular 7, lets tax authorities look through an offshore holding structure and re-characterize the deal as a direct transfer subject to Chinese tax.
The typical scenario is a foreign company selling shares in an offshore holding entity whose primary value comes from a Chinese subsidiary. Without Circular 7, no Chinese tax would apply because the actual transaction happens outside China. Under the rule, authorities can disregard the intermediate offshore entity when the arrangement lacks a reasonable commercial purpose beyond tax avoidance. Safe harbors exist for listed-company transactions in an open market and for transfers protected by a tax treaty.
When a transaction is re-characterized, the non-resident transferor owes CIT at 10%. The buyer is responsible for withholding, and failure to do so exposes the buyer to penalties. Authorities can pursue re-characterized transactions retrospectively for up to ten years, which is why cross-border M&A involving Chinese assets flags this issue at the diligence stage.
Late Payment Surcharges and Penalties
Missing a capital gains tax obligation in China gets expensive quickly. Under the Tax Collection Administration Law, unpaid tax accrues a daily surcharge of 0.05% of the amount owed, roughly 18% annualized.6National People’s Congress. Law of the People’s Republic of China on the Administration of Tax Collection The surcharge starts the day after the payment deadline and runs until you pay.
If the shortfall crosses into evasion, consequences escalate. Where a taxpayer fails to file or files a false return after being notified by the tax authority, fines range from 50% to five times the unpaid amount. For withholding agents who fail to withhold as required, the penalty can reach three times the unpaid tax.6National People’s Congress. Law of the People’s Republic of China on the Administration of Tax Collection In a Circular 7 re-characterization, that agent is the buyer, which is why the withholding obligation gets attention early in any deal involving Chinese assets.