Mar. 5 – The State Administration of Taxation has increased the corporate income tax deemed profits rates for non-resident enterprises carrying out services or projects in China.

Under Guoshuifa [2010] No. 19, issued on February 20, unless a resident enterprise is able to provide accurate accounting records, CIT liability for services or projects carried out in China will be determined using the following methods of calculating deemed profits: revenue, costs and operating expenses.

Under these methods, the profits rates are as follows: for businesses performing engineering work or the provision of design and consulting services the deemed profit rate shall be 15 percent to 30 percent; for the provision of management services, the deemed profit shall be 30 percent to 50 percent; and for the provision of other services or business activities other than services, the deemed profit rate shall be greater than or equal to 15 percent.

If it is determined by the tax authorities that the actual profit rates of non-resident enterprises are obviously higher than the above, they may assess the taxable income through a higher deemed profit rate.

For more information on corporate income tax considerations in China, contact Sabrina Zhang, the national tax partner for Dezan Shira & Associates at tax@dezshira.com.