The Industrial and Commercial Bank of China, the country's biggest lender, will receive several large tax breaks from the government to pave the way for its initial public offering later this year.
"ICBC can enjoy preferential tax policies from financial authorities to boost its restructuring and listing plan," the State Administration of Taxation said in a notice posted on its Website.
The bank must reevaluate all of its assets before listing, but the added value of the assets will be exempt from corporate tax, the notice said. That means the bank won't be taxed on paper profits earned from assets that have grown in value since they were purchased, such as real estate.
The bank's depreciation fees based on after-evaluation assets will also be exempt from taxes, the notice said.
"The tax credit, a common practice for big state-owned banks seeking listing, will make ICBC more attractive ahead of its listing debut," said Qiu Zhicheng, a Haitong Securities Co analyst.
The Beijing-based bank is expected to rake in about US$20 billion in a dual listing in Hong Kong and Shanghai at the end of October.
The bank controls 16 percent of the country's US$4.9 trillion in banking assets. The lender operates more than 18,000 branches nationwide serving over 150 million customers.
China Construction Bank, the Bank of China and the Bank of Communications received similar tax breaks before they went public.
Tax credits from the Ministry of Finance and the top tax authority reduced Shanghai-based BoCom's tax bill by 2.55 billion yuan.
ICBC previously received a US$15 billion bailout from the government in 2005.
(Shanghai Daily August 31, 2006)