Capital Gains Taxation: A Comparative Analysis of Key Issues, Elgar, Forthcoming

27 Pages Posted: 15 May 2017  

Yan Xu

The Chinese University of Hong Kong (CUHK) - Faculty of Law

Date Written: May 10, 2017


Taxation of capital gains has not yet been explicitly enacted into legislation in China. In recent years, however, a variety of types of capital gains received by individuals and corporations have begun to be subjected to income taxes imposed by the government. The debate about the possible introduction of an explicit, separate capital gains tax has concentrated on taxation of individual investors and transactions in securities rather than other types of assets. The absence of an explicit capital gains tax in China provides an opportunity for tax mitigation, although the extent to which taxpayers have utilized that opportunity is currently unclear.

This article examines the basic design features of taxation of capital gains under both individual and enterprise income tax laws in China, and analyses some particular design issues on the application of principles and rules to roll-over relief for corporate reorganization and the application of anti-avoidance rules in the case of taxation of capital gains.

The article concludes that China’s current taxation practice fails to differentiate capital gains from other defined income sources and to establish more specific rules. Such failure can result in heavy taxes on capital gains in some situations and light taxes in others, with no or little consistent policy justification for the discriminating outcomes. Statutory provisions and tax authority rules in the area have not been established in a systematic manner, albeit improvements made to them in recent years. The consideration of introducing a particular tax on capital gains in China will need to deal with these issues and overcome any other difficulties that may arise in legislation, administration and compliance.

Suggested Citation

Xu, Yan, China (May 10, 2017). Capital Gains Taxation: A Comparative Analysis of Key Issues, Elgar, Forthcoming. Available at SSRN: or

Yan Xu (Contact Author)

The Chinese University of Hong Kong (CUHK) - Faculty of Law ( email )

6/F, Lee Shau Kee Building
Shatin, New Territories
Kowloon, Sha Tin
Hong Kong

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