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China: Tax on Interest Income Suspended

(Nov. 14, 2008) In an announcement issued on October 26, 2008, China's Ministry of Finance stated that, with State Council (Cabinet) approval, the Ministry of Finance and the State Taxation Administration decided to temporarily suspend, as of October 9, 2008, collection of income tax on the interest income of individual stock account balances. The aim of the measure is to maintain the capital market's “stable and healthy development.” (Shiyue jiuri qi dui geren touzizhe zhengquan jiaoyi jiesuan zijin lixi suode zan mian zhengshou geren suode shui [As of October 9, Temporary Exemption from Individual Income Tax on the Asset Interest Income of Individual Investors' Stock Market Account Balances], Ministry of Finance website, Oct. 26, 2008, available at

Previously, in a circular issued on October 9, 2008, the two government agencies had announced that levying of individual income tax on earned interest income in savings accounts would be temporarily suspended as of that same day. The circular also sets forth the applicable tax rates to be levied on such income accrued during specified earlier periods: i.e., 5% for the period August 15, 2007, to October 8, 2008; 20% for the period November 1, 1999, to August 14, 2007; and none before October 31, 1999. (Guanyu chuxu cunkuan lixi suode youguan geren suode shui zhengce de tongzhi [Circular on the Policy Regarding Individual Income Tax Concerning Savings Account Interest Income] (Oct. 9, 2008), Ministry of Finance website, available at

As Xinhua News Agency noted regarding the new tax measures, “[t]he loosening in monetary policy highlighted the government's rising concern over the slowing economy and slumping capital market.” (China Scraps Interest Tax on Stock Account Balance, XINHUA, Oct. 26, 2008, available at