Ministry of Finance and two other departments: The difference income obtained by individual investors from transferring innovative enterprise CDRs will be temporarily exempted from individual income tax in the next two years.

On January 21, the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission issued the Announcement on Relevant Tax Policies during the Pilot Phase of the Domestic Issuance of Depositary Receipts for Innovative Enterprises. It mentioned that from January 1, 2026 to December 31, 2027, the income difference obtained by individual investors from transferring innovative enterprise CDR will be temporarily exempt from individual income tax. For the dividend income obtained by individual investors holding innovative enterprise CDR, a differential individual income tax policy will be implemented, with specific reference to the relevant provisions of the notices regarding differential individual income tax policies on dividend income of listed companies issued by the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission. Innovative enterprises are required to withhold and pay taxes through their domestic depositary institutions and submit a full and detailed declaration to the local tax authorities where the depositary institutions are located. The tax paid on dividend income obtained by individual investors overseas can be offset in accordance with the provisions of the individual income tax law and relevant bilateral tax treaties. The full text states that the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission Announcement No. 8 of 2026 continues to support the implementation of the innovation-driven development strategy, and the relevant tax policies during the pilot phase of the domestic issuance of depositary receipts for innovative enterprises (referred to as innovative enterprise CDR) are announced as follows: 1. Individual Income Tax Policy: - From January 1, 2026 to December 31, 2027, the income difference obtained by individual investors from transferring innovative enterprise CDR is temporarily exempt from individual income tax. - From January 1, 2026 to December 31, 2027, the dividend income obtained by individual investors holding innovative enterprise CDR will be subject to a differential individual income tax policy. The tax will be withheld and paid by the depositary institutions within the domestic innovation enterprises, and a full and detailed declaration will be submitted to the local tax authorities by the depositary institutions. The tax paid on dividend income obtained by individual investors overseas can be offset in accordance with the individual income tax law and bilateral tax treaties. 2. Corporate Income Tax Policy: - The income difference obtained from transferring innovative enterprise CDR and the dividend income obtained by holding innovative enterprise CDR are exempt from corporate income tax according to the policies on income from transfer of shares and dividend income.