The Ministry of Finance, the State Taxation Administration, the National Development and Reform Commission and the China Securities Regulatory Commission have jointly released the Circular on Piloting Corporate Income Tax Policy on Corporate Venture Capital Enterprises in Specific Area of Shanghai Pudong New Area, with retroactively effect from January 1, 2021.
According to the circular, for a corporate venture capital enterprise in specific area of Shanghai Pudong New Area, if its income from transfer of shares held for over three years represents more than 50% of its total income from the annual share transfer, its corporate income tax for the current year shall be levied by halving the shareholding of individual shareholders at the end of the year; and If its income from transfer of shares held for more than five years represents more than 50% of its total annual income from the annual share transfer, its corporate income tax for the current year shall be exempted by the shareholding of individual shareholders at the end of the year. It also specifies that individual shareholders shall pay personal income tax for their dividends derived from a corporate venture capital enterprise.