[Policy Regulations]

Article 5 of the Stamp Tax Law of the People’s Republic of China stipulates that the tax basis for stamp duty is as follows:

(3)  The tax basis for taxable business books is the total amount of paid in capital (share capital) and capital reserves recorded in the books;

Article 11 stipulates that for business books that have paid stamp duty, if the total amount of paid in capital (share capital) and capital reserves recorded in subsequent years increases compared to the total amount of paid in capital (share capital) and capital reserves that have already paid stamp duty, the tax payable shall be calculated based on the increased amount.

[Practice]

1. The registered capital is not subject to stamp duty, and the paid up capital is subject to stamp duty in accordance with regulations;

2. Paid-in capital is reduced first and then increased. When reducing capital, stamp duty will not be refunded. If the amount of stamp duty paid before the reduction does not exceed the amount of stamp duty paid, there is no need to subsidize the stamp. Only the excess amount of stamp duty that has already been applied will be subsidized.