China’s crack down on tax anti-avoidance took another major step forward with the release of a new Circular by the SAT which may severely restrict the ability of offshore holding companies to take advantage of tax treaty benefits.
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China Takes Action on Non-resident Enterprises Withholding
By King and Wood on
Posted in Tax
In the year following the entry into effect of the PRC Enterprise Income Tax Law, the Chinese tax authorities have issued several rules clarifying emphasizing the position on withholding tax on China-sourced income of non-resident enterprises. Recently, a new regulation was issued that sets out the procedural rules for withholding income tax, the Provisional Administrative Measures on Withholding Enterprise Income Tax for Non-resident Enterprises, Guoshuifa [2009] No. 3.
Stephen Nelson, Partner & Alice Zhang, TaxationContinue Reading China Takes Action on Non-resident Enterprises Withholding
PRC Confirms Pass-through as “Allocate First, Then Tax”
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Posted in Tax
The pass-through tax treatment for partnership enterprises has finally been officially confirmed by the PRC tax authority, via the Circular on the Issues Concerning the Income Tax of the Partners in Partnership Enterprises, Caishui [2008] No. 159, which took effect retroactively as of January 1, 2008. It represents an important first step in the development of Chinese partnership tax law.
Stephen Nelson, Partner, and Alice Zhang, TaxationContinue Reading PRC Confirms Pass-through as “Allocate First, Then Tax”
Import Tax and VAT on Equipment in China: Update
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Posted in Tax
The PRC government now has issued two notices grandfathering the old VAT benefits until the middle of this year, one for imported equipment and one for domestic equipment.
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China’s VAT Reforms
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On November 5, 2008, the PRC State Council passed The Provisional Regulations of the People’s Republic of China on Value-Added Tax, extending VAT reforms to all industries nationwide from January 1, 2009.
Stephen Nelson, Partner, Taxation & Alice Zhang, Legal Assistant
Transitional Tax Incentive Policies relating to the Enterprise Income Tax
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Posted in Tax
The new PRC Enterprise Income Tax Law (“EIT law”) came into effect on January 1, 2008 and consolidated the enterprise income tax regimes for domestic enterprises and foreign-invested enterprises and ended the system of dual income tax regimes. The new EIT law unified the tax rates and tax incentive policies for both domestic enterprises and foreign-invested enterprises so that more equitable market conditions are created.
For those enterprises previously enjoying favorable tax incentives under the former tax regimes, the new EIT law provides a 5-year transitional period. For example, enterprises that enjoyed fixed term tax exemptions and reductions may continue to enjoy them until the end of the original term. Enterprises that used to enjoy a 15% tax rate will gradually shift from the lower rate to the 25% as required by the new EIT law. The transitional tax incentive policies are provided in many different tax regulations. The following is an introduction of some of the transitional tax policies:
Stephen Nelson, head of King & Wood’s Taxation Practice & Wu Libin
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Tax Relief Policy in Post-Disaster Areas
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The massive May 12, 2008 Wenchuan earthquake caused heavy property damage and saddening losses of life in the Chinese Providences of Sichuan, Shanxi, and Gansu. In order to support the earthquake relief and reconstruction effort, the Ministry of Finance and State Administration of Taxation has implemented post disaster tax deductions and exemptions. These relief measures impact affected individuals or enterprises, and also donations toward the relief effort. The most significant tax relief measures were announced in the “Notice on Implementing the Earthquake Relief and Reconstruction Tax Policies”(Notice 62). The taxes covered in the Notice included: enterprise income tax, individual income tax, house property tax, resource tax, stamp tax, urban land use tax, vehicle and vessel use tax, import tax.
By Zhang Yu, Wang Xiujuan, Chengdu Office of King & Wood, FDI