The China (Shanghai) Pilot Free Trade Zone and its Lin-gang Special Area have been piloting a stamp tax exemption policy for offshore trade since April this year, marking a significant step forward in China's exploration of offshore taxation systems.

According to the Shanghai Municipal Tax Service of the State Taxation Administration, the policy benefited 325 enterprises in the second and third quarters of 2024, with tax reductions totaling over 96 million yuan ($13.25 million).

The policy, announced by China's Ministry of Finance and the State Taxation Administration on Feb 18, exempts stamp tax on sales contracts for offshore resale transactions conducted by enterprises registered in the designated areas from April 1, 2024, to March 31, 2025. It is the first tax incentive policy for offshore businesses implemented in China.

Offshore trade involves the direct shipment of goods from the exporting country to the importing country without entering China's territory. The stamp tax comprises a major tax burden for this type of trade. The exemption has significantly reduced operating costs for businesses. For instance, Shanghai Qihong International Trade Co Ltd, a leading non-ferrous metal commodity trader registered in Lin-gang, achieved 1.8 billion yuan in offshore resale transactions in the third quarter, a quarter-on-quarter increase of over 150 percent.

Furthermore, the policy has enhanced the confidence of offshore trade enterprises in establishing operations and developing in the region. CITIC Metal, a leading metal and mineral trader in China, established a subsidiary in Lin-gang at the end of 2023, attracted by the area's convenience and preferential measures for offshore trade. Since the pilot program began, the subsidiary has claimed nearly 800,000 yuan in stamp tax reductions.