China may exempt interest tax on corporate bonds

Beijing, Feb 27: Individual investors may pay less tax on interest from corporate bonds as part of an effort to improve the market for corporate securities, the China Securities Journal reported Monday.

The China Securities Regulatory Commission is proposing that income tax on corporate bond interest be reduced or eliminated for individual investors, the report said. The current tax rate for individual investors is 20 percent, Xinhua reported.

Analysts say the high tax rate is the main reason individuals are unwilling to invest in corporate bonds, even though they are issued by credit-worthy companies, said the report.

The total value of corporate bonds issued in 2011 in China was 129.1 billion yuan ($20.49 billion), up sharply from 51.2 billion yuan in 2010. However, the corporate bond market is still small in comparison with bank credit and equity financing, the report said.

IANS