29 May 2019
China Outlines Implications of Enterprise Income Tax Policy for Perpetual Corporate Bonds
Details as to how the enterprise income tax policy applies in the case of perpetual corporate bonds have been released in a joint statement from the Ministry of Finance and State Administration of Taxation.
The statement highlighted two key issues:
- The enterprise income tax policy relating to dividends and bonuses may be deemed to apply to any enterprise-issued perpetual bonds. In such an instance, any interest income derived by investors from perpetual corporate bonds in the form of dividends or bonuses shall be treated in accordance with the relevant provisions of the prevailing enterprise income tax policy
- The enterprise income tax policy relating to bond interest may apply to perpetual corporate bonds that meet certain conditions. This will be deemed to be the case if the bond interest expense of the issuer is deductible for enterprise income tax purposes. The interest income derived by the investor from perpetual corporate bonds, however, shall still be subject to enterprise income tax in accordance with the relevant legislation
The above requirements were deemed to have become effective as of 1 January this year.
For further details (in Chinese), please access the following link: