Frequently Asked Question: If company A commissions a bank to provide entrusted loans for company B, shall company B be subject to stamp tax on the entrusted loan contract?

According to Interim Regulations of the People's Republic of China on Stamp Tax and Stamp Tax Schedule of Tax Items and Tax Rates, the loan contract that shall be levied stamp tax on is the loan contract entered by banks and other financial organizations and borrowers except interbank loan agreements, which means the loans contract entered between non-financial enterprises shall not be levied stamp tax on. Therefore, whereas the actual fund provider is company A rather than the bank, shall the loan contract signed by company B be a dutiable loan contract?

According to article No.6 of Interpretations and Regulations of the State Administration of Taxation on Specific Issues Concerning Stamp Tax (Guo Shui Fa [1991] No.155), which is the loan contract signed by a financial organization and an entity using the loans shall be affixed with stamps by rule when the financial organization is commissioned to offer entrusted loans, the loan contract signed by company B as a fund utilizing entity shall be levied stamp tax on.

In practice, normally the entrusted loan contract is signed by the entrusting party company A, the bank and the borrower company B. Shall every party to the contract pay stamp tax in such cases?

According to Circular on the Entrusted Loan Contract Handled by Municipal Financial Organizations Subject to Stamp Tax (Hu Shui Di [1991] No.121), the entrusted loan contracts or agreements used by banks are all within the range of the loan contracts entered by financial organizations and borrowers. According to article No.6 of Guo Shui Fa [1991] No.155 issued by State Administration of Taxation, the bank and the borrower shall be responsible for affixing on each copy it holds the full amount of tax stamps due. At the same time other parties to the contract shall not be subject to stamp tax. Hence if an entrusted loan contract is entered by entrusting party, the bank and the borrower, only one copy of the contract held by the bank and the borrower company B individually shall be stamped. Meanwhile, entrusting party company A shall not be subject to stamp tax.