CX Briefing: China Levies VAT on Government Bond Interest Income

A rundown of the news making headlines in and around China:

Bond tax levied: Value-added tax (VAT) will be levied on interest income from newly issued Chinese sovereign and local government bonds and financial bonds. The VAT will be effective Aug. 8, according to a notice issued by the finance ministry and the tax authority Friday. To encourage investor participation in the bond market, China has long offered tax exemptions on interest income from these types of bonds. This was partly to attract capital and expand the bond market — a goal that is now considered complete given the market’s considerable scale. Among the reasons for imposing the tax is an effort to avoid funds remaining parked in these low-risk bonds, while it will also help increase fiscal revenue. However, individual investors will remain exempt from VAT on interest income from these bonds issued on or after Aug. 8.