China's Ministry of Finance and State Administration of Taxation has jointly issued a circular on taxation for wholly-owned foreign banks that are transformed from foreign bank branches.

The circular involves business tax, value-added tax, enterprise income tax, stamp tax, and tax on real estate transfer.

According to the Regulations on Foreign-funded Banks promulgated in November 2006, eligible foreign banks are allowed to incorporate as wholly-owned banks in China, and foreign bank branches are permitted to be transformed into wholly-owned foreign banks.

In the process of transformation, the circular says, the transfer of property rights and equities from a former bank branch to the transformed wholly-owned bank are exempted from business and value-added taxes.

A transformed wholly-owned foreign bank should continue to enjoy tax holidays the former bank branch was being enjoyed. If the tax holidays expired before the transformation, the new wholly-owned foreign bank should not to enjoy them, according to the circular.

Source: Xinhua