Capital gains tax in China

China does not have a separate capital gains tax (CGT) regime. Instead, profits from selling property, equity, and other assets are captured under the Individual Income Tax (IIT) Law of the People's Republic of China as "income from the transfer of property." A flat rate of 20% applies to this income category, distinct from the progressive 3-45% scale that governs wages and comprehensive income. The result is a patchwork of rules: generous exemptions for domestic stock-market investors sit alongside tightening enforcement for residents with overseas investment gains.

How Are Gains on Property Sales Taxed in China?

When an individual sells real property in China, the net gain is subject to IIT at 20%. Taxable income is calculated as the sale price minus the original acquisition cost and allowable expenses (deed tax paid on purchase, agent fees, and documented renovation costs, for example). Where complete cost records are unavailable or cannot be verified, local tax bureaux may apply a simplified assessed-value method, typically imposing IIT at 1% to 3% of the gross sale price depending on the property type and province -- a lower administrative burden but often a higher effective rate on high-gain transactions.

A significant sole-home exemption applies: gains from the transfer of a family's only residential property held and used for more than five continuous years are temporarily exempt from IIT. Both the five-year holding period and the "only family home" status must be satisfied simultaneously; a second property in the household removes the exemption entirely. Sellers in Beijing, Shanghai, Guangzhou, and Shenzhen who have held residential property for at least two years have also been exempt from the 5% value-added tax (VAT) on the gross proceeds since December 2024, separately from the IIT treatment. [1]

Are Gains on Chinese Stock Exchanges Taxable?

Gains realised by individual investors from selling shares listed on the Shanghai, Shenzhen, and Beijing Stock Exchanges are provisionally exempt from IIT. This exemption has been in continuous effect since the early 1990s and is periodically renewed by State Council directive rather than codified as a permanent rule -- making it technically temporary even though it has never lapsed in practice. Investors still pay stamp duty of 0.05% on the sell side of each transaction (reduced from 0.1% in August 2023). Dividend income from listed shares faces different treatment: a 20% IIT rate, reduced to 10% for holdings of one to twelve months and to zero for holdings exceeding twelve months. [2]

B-shares (CNY or USD-denominated shares traded by foreigners on mainland exchanges) and shares on the Beijing Stock Exchange follow the same exemption for individual investors. Foreign institutional investors do not share this exemption and are subject to a 10% withholding tax on gains unless a bilateral tax treaty reduces the rate.

How Are Unlisted Share and Equity Transfers Taxed?

Transfers of equity in unlisted Chinese enterprises by individuals are taxable at the 20% IIT flat rate on net gain. This area is governed in detail by SAT Announcement [2014] No. 67 (Administrative Measures for Individual IIT on Income Derived from Equity Transfer), which sets out how taxable income is calculated, how original equity value is determined, and the anti-avoidance rules that prevent artificially low transfer prices. If the stated price falls below the net asset value of the company without a legitimate commercial explanation, the tax authority may re-assess using net assets or a qualified valuation. The receiving party serves as the withholding agent and must notify the tax authority within five working days of executing the transfer agreement. [3]

For offshore-structured transfers -- where a foreign holding company holding Chinese assets is sold without the underlying Chinese entity changing hands -- SAT Bulletin 7 (2015) (Announcement on Several Issues Concerning Enterprise Income Tax on Indirect Transfers of Assets by Non-Resident Enterprises) allows Chinese authorities to look through the offshore transaction and tax the gain as if it were sourced in China, where the primary purpose of the offshore structure is to avoid Chinese tax. Although Bulletin 7 formally targets non-resident enterprises, its logic shapes how resident-individual offshore structures are scrutinised as well.

What Is the Land Appreciation Tax?

Land Appreciation Tax (LAT) is a separate levy on gains from transferring land-use rights and the buildings standing on that land. It is paid primarily by developers and corporate property vendors, not by individual homeowners selling a single residence (who face IIT instead). LAT uses four progressive rate brackets based on the ratio of appreciation to deductible costs:

Deductible items include the cost of the land-use right, construction and installation expenditure, infrastructure spending, financing costs (within limits), and taxes paid on the transaction. LAT is deductible against Enterprise Income Tax (EIT). Developers typically make provisional payments of 1-3% of gross revenue during the project and settle the final balance after project completion. [4]

How Is China Enforcing Tax on Residents' Overseas Investment Gains?

Since 2025, China has materially stepped up enforcement of IIT on overseas investment income earned by Chinese tax residents. Residents -- defined as individuals domiciled in China, or those spending 183 days or more in China in a tax year -- are subject to IIT on worldwide income, including capital gains on foreign shares, equity interests, and real property. Gains are taxable at 20%, with late-payment interest accruing at 0.05% per day from the original due date.

The mechanism is China's adoption of the OECD Common Reporting Standard (CRS) in 2018, which creates automatic exchange of financial account data with nearly 150 jurisdictions. In January 2026, the State Taxation Administration announced a self-review window covering overseas income for the years 2022 to 2024. Tax authorities in Shanghai, Zhejiang, Hubei, and Shandong ran a coordinated 48-hour enforcement sweep in March 2025 contacting individuals with unreported foreign income. The campaign, initially focused on those with offshore assets exceeding USD 10 million, has expanded to include investors with under USD 1 million in foreign holdings. Voluntary correction before formal investigation typically limits exposure to back tax plus statutory interest; penalties are generally avoidable at the self-correction stage but can be severe if authorities must escalate. [5]

For a broader view of property holding costs, VAT, deed tax, and stamp duty in China, see the China country overview. The rules summarised here represent the framework as understood at the date of review; thresholds, provisional exemptions, and enforcement priorities change frequently. Consult a qualified tax professional before making any asset-transfer decisions.