China imposes tax on some stock trades

–(– 01/04/2010 – International industry news provided by Financial News USA.

Contributed by the AP

China imposed a tax Thursday on sales of previously nontradable shares in an apparent attempt to reassure investors by discouraging a possible flood of shares from entering the market and depressing prices.

Individuals who sell previously nontradable shares will face a 20 percent income tax on their profit starting Friday, the official Xinhua News Agency said. It said trading in shares already in the market will continue to be free of income tax.

State-owned Chinese companies sometimes distribute nontradable shares to executives, investors and others when they become shareholding corporations. They can be sold after a lockup period of several months or years, and investors worry that the shares available for trading will depress prices.

Even with the new tax, sellers could reap hefty profits from previously nontradable shares because Chinese stocks rose sharply in 2009. The country’s main market index ended the year up 80 percent.

Beijing has previously tried to reassure investors by adjusting taxes on trading and imposing temporary curbs on sales of previously nontradable shares. Some companies have issued additional shares to investors to compensate for a decline in price as nontradable shares enter the market. About Financial News USA

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