Shanghai may offer corporate tax benefits in free trade zone

Shanghai may offer tax advantages to companies who operate in its free trade zone (FTZ) the official Shanghai Securities News reported on Monday, as leaks of potential reforms and industrial policies in the zone fan stock market speculation.

The report cited anonymous insider sources saying that the government will implement preferential policies related to the taxation of assets in the free trade zone, without giving further detail.

“This should attract foreign and domestic companies to the zone, and at the same time reduce their cash flow burdens,” the report said.

However, the report went on to quote other officials specifically denying rumours in circulation that the zone would feature a 15 per cent corporate income tax rate, instead of the current 25 per cent rate for ordinary enterprises.

Mainland firms expected to benefit from the construction and operation of the zone have seen their valuations juiced in recent weeks by a steady drumbeat of leaked policy drafts and insider speculation describing proposed policy changes and industrial policies in the FTZ. These have ranged from deep changes to the way financial markets will operate in the zone to more minor industrial policies related to video game consoles and “cultural relic” auctions.

However, the government has yet to formally commit to any of the policies or set out a timeline. Multiple regulatory bureaucracies will have jurisdiction over different aspects of zone operations.

In early trade on Monday, Shanghai Pudong Development Bank surged 8.2 per cent in Shanghai, while China Shipping Container Lines tested its highest in nearly seven months, surging by the maximum 10 per cent limit. Other port and logistics companies have also outperformed the wider index.