China Scraps Interest Tax on Stock Settlement Funds

By Zhao Yidi

Oct. 26 (Bloomberg) -- China scrapped the tax individuals pay on interest earned from stock settlement funds in an effort to boost the nation's equity market, which has fallen 67 percent this year.

Investors don't have to pay tax on interest income accumulated from their settlement funds effective Oct. 9, the Ministry of Finance said in a statement published on its Web site.

This policy change comes amid a package of measures the government is using to revive the nation's plunging stock market. The nation is restricting sales of state-owned shares by introducing exchangeable bonds and it simplified the share buyback process. China also scrapped the tax on stock purchases in September.

``This announcement is a natural extension of the policy to remove tax payments on interest income from bank deposits,'' said Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong, in an e-mail. ``We expect this to have a mildly positive effect on the market.''

To contact the reporter on this story: Zhao Yidi in Beijing at at yzhao7@bloomberg.net