China Capital Gains Tax: Rules for Individuals & Companies

In China, proceeds from selling capital assets are integrated into the broader income tax framework, as the country does not have a separate tax system for capital gains. Gains realized from the transfer of assets like real estate and shares are treated as income and are subject to either the Individual Income Tax (IIT) Law or the Enterprise Income Tax (EIT) Law. The specific tax treatment, rates, and exemptions depend on the type of taxpayer—an individual or a corporation—and the nature of the asset being sold.

Tax Liability for Individuals

An individual’s responsibility for paying tax on capital gains in China is determined by their residency status. The law distinguishes between Tax Resident Individuals (TRIs) and Non-Resident Individuals (NRIs). A person is considered a TRI if they have a domicile in China or reside in the country for a cumulative total of 183 days or more in a single tax year. TRIs are subject to Chinese IIT on their worldwide income, which includes capital gains from assets located both inside and outside of China.

Conversely, an NRI is an individual who does not have a domicile in China and resides in the country for less than 183 days in a tax year. Their tax liability is limited to income derived from sources within China. This means any capital gains from the sale of assets located in China would be taxable, while gains from assets outside the country would not be. An individual’s physical presence in China directly impacts their tax obligations, making it important to track days spent in the country.

Taxation of Specific Asset Transfers

The tax treatment of capital gains for individuals becomes more specific when examining the type of asset being transferred.

Real Estate

When an individual sells real estate in China, the gain is subject to two primary taxes. The net gain is subject to Individual Income Tax (IIT) at a flat rate of 20%. The transaction is also subject to Land Appreciation Tax (LAT), which is levied on the appreciation amount at progressive rates ranging from 30% to 60%. The taxable gain is calculated by subtracting the original purchase price and certain reasonable expenses from the final sale price.

An exemption from IIT exists for individuals selling their primary personal residence, provided they have owned it for five years or more. A temporary policy also offers tax relief through December 31, 2025. A taxpayer who sells a private residence and buys a new one in the same city within one year of the sale may be eligible for a partial or full refund of the IIT paid.

Shares and Equities

The taxation of gains from selling shares and other equities depends on where the shares are listed and traded. For individual investors, gains from the transfer of A-shares and B-shares listed on recognized Chinese stock exchanges are currently exempt from IIT.

This favorable treatment does not extend to all types of equity transfers. Gains realized from the sale of shares in unlisted or private Chinese companies are considered a form of property transfer income and are subject to the standard 20% IIT rate.

Corporate Capital Gains Taxation

For corporate entities in China, gains from the sale of assets are treated as part of regular taxable income and subject to the standard Enterprise Income Tax (EIT). The standard EIT rate is 25%. When a corporation sells a capital asset, the gain is calculated as the difference between the sales proceeds and the asset’s net book value. This gain is then included in the company’s total profit for the year.

While the 25% rate is standard, certain preferential rates may be available. Enterprises classified as high-tech or those operating in specific encouraged industries or regions might qualify for a reduced EIT rate of 15%. Foreign-invested enterprises are subject to the same rules unless specific tax treaty provisions offer relief.

Tax Reporting and Payment Procedures

The responsibility for reporting and paying tax on a capital gain falls on either the taxpayer directly or a designated withholding agent. The tax must be declared to the tax bureau where the asset is located. For real estate, this is the authority in the property’s jurisdiction; for equity, it is where the company is registered.

Reporting deadlines are strict. A withholding agent must file and remit the tax within a specified period following the transaction. For individuals, the tax is often due shortly after the gain is realized, with real estate gains settled during the property transfer process. To complete the filing, taxpayers must submit documentation, including the transfer agreement, proof of the original purchase price, and receipts for deductible expenses.