Op/Ed Commentary: Chris Devonshire-Ellis and Richard Hoffmann

Mar. 9 – With foreign company representative offices coming under intense scrutiny at the present time due to the changes in tax treatments levied from January 1, 2010, pressure is now on the chief representatives of China-based ROs to fully comply with tax audits and questions raised over their activities for the audit period 2009.

The State Administration of Tax issued Guoshuifa [2010] No. 18, issued on February 20, 2010, explicitly stipulates that ROs will need to pay corporate income tax on their taxable income, as well as sales tax and VAT. ROs will need to use the cost plus method or actual revenue method to determine their deemed profit margins, and under the new regulations, that deemed profit margin is to be no less than 15 percent, an increase from the previous deemed profit margin of 10 percent. Read the rest of this entry »

Op/Ed Commentary:Chris Devonshire-Ellis and Richard Hoffmann

Mar. 5 – One symptom of the tightening of China’s economy and the impact of labor law is an increasing desire by Chinese employers to offset or reduce potential liabilities with their expatriate employees, such as expatriates employed by domestic Chinese companies being asked to establish an offshore company and to be paid through that in order “to help reduce the company tax burden.”

However, in doing so, expatriate employees may wish to consider that such moves are purely for the benefit of the employer and are certainly not for the advantage of the expatriate. Eschewing a perfectly good employment contract, in which the employee – including expatriate – rights are enshrined under China’s labor laws is not to the expatriates benefit. In fact, for expatriates who would undertake such a scheme, it would change the employee status by removing them from the payroll as an employee and onto a service contract as a company. This removes all labor law obligations towards the employee and does away with any need to pay them compensation, severance, etc. as would otherwise be due under China’s labor laws. Read the rest of this entry »

Mar. 5 – The Singapore Chamber of Commerce, the Danish Chamber of Commerce and the Israel Chamber of Commerce hosted an event on 2010 annual tax compliance and audit requirements for individuals and small and medium sized enterprises at the Westin Hotel in Beijing yesterday.

Keynote speaker Sabrina Zhang of Dezan Shira and Associates presented important considerations concerning bookkeeping requirements, tax filing obligations, and annual audit and tax compliance. She also noted that new representative office regulations had just been released and that local administration offices have yet to release further information on the implementation of these new rules. Read the rest of this entry »

Mar. 4 – Representative offices are no longer exempt from corporate income tax in China according to a recently issued circular by the State Administration of Taxation.

Guoshuifa [2010] No. 18, issued on February 20, 2010, explicitly stipulates that ROs shall pay corporate income tax on their taxable income, as well as sales tax and VAT, and will be required to assess CIT liability using a cost plus method or actual revenue method. Under either method, the deemed profit margin shall be no less than 15 percent, an increase from the previous deemed profit margin of 10 percent. The effective date of the measures is January 1, 2010. Read the rest of this entry »