SHANGHAI Nov 16 China will apply a sliding
scale to taxes on stock dividends for individuals from January
1, 2013, as authorities struggle to restore investor interest in
swooning domestic equities markets.
According to an announcement on the Ministry of Finance's
website on Friday, dividends will be taxed at diminishing rates
Dividends from shares held for less than one month will be
taxed at 20 percent, while stocks held for more than one month
but less than one year will be taxed at 10 percent. For stocks
held for over a year, the rate drops to 5 percent.
"The longer investors hold shares, the lower their tax
burden is," said the announcement.
"This will encourage long-term investment strategies and
suppress short-term speculation."
The tax rate on dividends is currently a flat 10 percent.
Chinese market reformers have carried out piecemeal reforms
to transaction fees and other minor regulations this year to
encourage investors to return to trading stocks.
Head securities regulator Guo Shuqing has repeatedly
criticized the preference of many retail investors to engage in
short-term speculation on lesser known tickers, encouraging
investors to buy and hold blue-chip shares instead.
These moves have yet to inspire the markets. China's CSI300
index, which tracks the largest tickers on the
Shanghai and Shenzhen exchanges, fell to its lowest level this
year on Friday. The Shanghai Composite Index is down
over 8 percent this year after shedding 22 percent in 2011.
(Reporting by Pete Sweeney and Samuel Shen; Editing by Sanjeev