By LI Linxu

In its latest move to promote high-standard opening up, China has rolled out a new preferential policy in the China (Shanghai) Pilot Free Trade Zone (FTZ) and the zone's Lingang Special Area.

Offshore trade in these areas will be exempt from stamp tax during trial, effective from April 1, 2024 to March 31, 2025, according to a circular jointly issued by the Ministry of Finance and the State Taxation Administration.

Entities registered in these areas conducting offshore trade business will benefit from the new policy.

Offshore trade refers to services associated with the trading of goods which are purchased from a non-resident enterprise and then sold to another non-resident enterprise without the goods ever entering or leaving the country.

China (Shanghai) Pilot Free Trade Zone. (PHOTO: XINHUA)

The development of offshore trade, an important business model in FTZs, reflects an FTZ's competitiveness in international market, as well as its capability in global market resource allocation.

In recent years, offshore trade has been booming in China's FTZs. In Lingang Special Area, its offshore trade scale doubled each year in the last two years, according to the latest statistics.

Notably, in 2021, the Lingang Special Area rolled out 24 measures to support offshore trade, focusing on cultivating offshore trade industrial clusters, facilitating international settlement and financing, and innovating regulation models.

Last December, the State Council approved a general plan for advancing institutional opening-up of the China (Shanghai) Pilot FTZ in alignment with high-standard international economic and trade rules.

In response to the plan, Shanghai issued a detailed implementation program last month.

This month, the city released its latest version of an action plan to build a world-class business environment, vowing to build the Lingang Special Area into an institutional innovation highland for business environment.

The exemption of stamp tax in the pilot areas is an important step to align with high-standard international economic and trade rules. It will cut costs for offshore trade and attract more investors to do offshore trade in these areas.