Essential Guide for Yiwu Business Owners: Understanding Stamp Duty on Contracts, Leases, and Ledgers, and the Penalties for Non-Compliance

Business owners operating in Yiwu International Trade City, Huangyuan Market, and Beixiazhu sign contracts almost every day: procurement contracts for purchasing goods, sales contracts for selling goods, lease contracts for renting stalls, and transportation contracts for shipping goods... Many owners believe that 'a contract is complete once both parties sign and stamp it,' but they often overlook one thing — these contracts are subject to stamp duty.

The Stamp Tax Law of the People's Republic of China (中华人民共和国印花税法) came into effect on July 1, 2022, clearly defining the tax rates, tax bases, and declaration periods. Today, Jinfan Tax & Finance will explain the most common stamp duty pitfalls for Yiwu business owners in plain language.

I. Which Contracts Are Subject to Stamp Duty? What Are the Rates?

Stamp duty is only levied on the documents listed in the 'Stamp Tax Items and Rates Table' attached to the Stamp Tax Law, not all contracts. The most common types of contracts encountered by Yiwu business owners include:

(The stamp duty on securities transactions is 1‰, levied on the seller, which is generally not applicable to Yiwu business owners.)

Key Reminder: Not All 'Contracts' Are Subject to Stamp Duty

• 'Sales Contract' is limited to movable property sales; real estate sales fall under 'Deed of Property Transfer' with a rate of 0.5‰, do not confuse them;
• Consulting services, intermediary, legal, and accounting service contracts are not included in the tax item list and are not subject to stamp duty;
• Electronic orders between individuals and e-commerce operators are exempt from stamp duty (Article 12 of the Stamp Tax Law).

II. How to Calculate the Tax Base? Proper Contract Writing Can Save Money

The Tax on Stamp Law (Article 5) clearly states: The tax base for taxable contracts is the amount listed in the contract, excluding the specified value-added tax (VAT) amount.

In other words: If the contract clearly separates and specifies the "amount excluding tax" and the "VAT," then the stamp tax will be calculated based on the amount excluding tax; if only a total price including tax is written without separate listing, it may be calculated based on the total amount including tax.

Comparison of Calculations: A 1 million CNY Purchase Contract

A difference of 39 CNY per contract might not seem like much, but when signing dozens or even hundreds of contracts in a year, it becomes a significant cost. For lease contracts, which have a higher tax rate of 1‰, the difference is even more pronounced:

• A stall rental contract with an annual rent of 200,000 CNY (excluding tax) → 200,000 CNY × 1‰ = 200 CNY;
• If only stating "annual rent including tax 218,000 CNY" without specifying the VAT separately → 218,000 CNY × 1‰ = 218 CNY.

What If the Amount Is Not Clearly Stated?

According to Article 6 of the Tax on Stamp Law: If the taxable contract does not specify the amount, the actual settlement amount shall be used to determine the tax base; if this still cannot be determined, the market price at the time of the contract's establishment shall be used. Therefore, saying "we'll leave the amount blank in the contract and decide later" does not exempt one from paying taxes.

III. Small-Scale Taxpayers, Micro and Small Enterprises, and Individual Businesses: Stamp Tax Can Be Halved

According to the second article of the Announcement by the Ministry of Finance and the State Administration of Taxation on Further Supporting the Development of Micro and Small Enterprises and Individual Businesses with Relevant Tax and Fee Policies (Announcement No. 12 [2023] of the Ministry of Finance and the State Administration of Taxation), from January 1, 2023, to December 31, 2027, for small-scale VAT taxpayers, micro and small enterprises, and individual businesses, stamp tax (excluding securities transaction stamp tax) will be halved.

Q2: If the contract already includes tax, should the stamp duty be calculated based on the invoiced amount?

No. The taxable basis is the contract amount, not the invoice amount; only when the contract does not specify an amount, it will be determined based on the actual settlement amount. Therefore, it is crucial to clearly state the contract amount and list VAT separately.

Q3: Is stamp duty required for factory renovation or making advertisements for a store?

Yes. A construction contract for renovation falls under the category of "construction project contract," and the production of advertisement boards falls under the category of "work contract," both with a tax rate of 0.3‰.

Q4: Do small-scale taxpayers need to apply specifically for the 50% reduction in stamp duty?

No separate approval is needed. When filing through the electronic tax bureau, if the conditions are met, the system will automatically identify the preferential treatment and calculate the payment at the reduced rate. Just keep relevant documents for inspection.

Q5: What if there was an omission in previous years?

Conduct a self-inspection and make up the payment as soon as possible. Late fees are charged daily at a rate of 0.05% from the date of arrears, so the earlier you handle it, the lower the cost. Proactively conducting a self-inspection and making up the payment also facilitates subsequent communication.

Sources and References

• The Stamp Tax Law of the People's Republic of China (adopted at the 29th meeting of the Standing Committee of the 13th National People's Congress on June 10, 2021, effective July 1, 2022) ——Guangdong Provincial Tax Service, State Administration of Taxation·Full Text; State Administration of Taxation Policy and Regulations Database https://fgk.chinatax.gov.cn/
• Announcement of the Ministry of Finance and the State Administration of Taxation on Further Supporting the Development of Small and Micro Enterprises and Individual Businesses (Announcement No. 12 of 2023 by the Ministry of Finance and the State Administration of Taxation) Article 2 ——State Administration of Taxation Policy and Regulations Database
• The Tax Collection and Administration Law of the People's Republic of China, Article 32 (late fees), Article 64 (penalties for failure to file tax returns) ——National People's Congress of China Website

In Conclusion

Although the amount of stamp duty is not large, the late fees and fines resulting from missed filings can be significant. Jinfan (Yiwu) Tax & Finance Management Co., Ltd. has been operating in Yiwu for 10 years and is familiar with the contract and bookkeeping scenarios of various merchants in the International Trade City, Huangyuan Market, and Beixiazhu. We can assist you with self-inspections for stamp duty, breakdown of contract amounts, and quarterly filing on your behalf. If you need assistance, feel free to contact our managers or visit our company directly.