China has introduced temporary tax incentives to support the pilot program for the domestic issuance of depositary receipts (CDRs) by innovative enterprises. The measures provide corporate, VAT, and individual income tax relief for certain investors and funds, and will apply from 1 January 2026 through 31 December 2027.
China’s Ministry of Finance, the State Taxation Administration and the China Securities Regulatory Commission have issued Announcement No. 8 of 2026 on 21 January 2026, setting out temporary tax incentives to support the pilot programme for the domestic issuance of depositary receipts (CDRs) by innovative enterprises.
Innovative enterprise CDRs refer to depositary receipts issued domestically in China that represent rights and interests in underlying overseas securities, in line with the State Council–approved pilot framework for innovative enterprises.
The tax incentives are as follows:
Corporate income tax
Corporate investors are taxed on CDR capital gains and dividends under standard rules for equity transfers and shareholding income.
Corporate income tax will not be levied on the capital gains obtained by public investment funds (closed-end funds and open-end funds) from the transfer of innovative enterprise CDRs and on the dividend income obtained from holding innovative enterprise CDRs, in accordance with the tax policy for public investment funds.
Public investment funds enjoy exemptions consistent with existing fund tax policies, while Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) are fully exempt from corporate income tax on capital gains and dividend income from innovative enterprise CDRs.
Value-added tax
Individual investors are temporarily exempt from VAT on the price difference income from the transfer of CDRs of innovative enterprises. Institutional investors are subject to VAT according to financial product transfer rules, while fund managers and QFII/RQFII investors benefit from temporary VAT exemptions on relevant CDR transfer gains during the pilot period.
Individual income tax
During the pilot period, individual investors are exempt from income tax on capital gains from the transfer of innovative enterprise CDRs. Dividends and bonuses from CDR holdings are subject to the existing differentiated dividend tax regime for listed companies, with taxes withheld via domestic depositary institutions and foreign taxes eligible for credits under domestic law and tax treaties.
The tax incentives will apply from 1 January 2026 to 31 December 2027.
