Finance, Tax and Accounting

Huizhou Launches Enterprise Registration and Examination Reform

May 23 – The Huizhou government held a mobilization conference on May 17 to officially launch its enterprise registration and examination trial reform, which aims to “simplify what can be simplified; permit what can be permitted; accelerate what can be accelerated; and optimize what needs to be optimized.”

It is the first time that the Guangdong provincial government has approved the enterprise registration and examination reform to be trialed at the city-level. As a result, the Guangdong government has ordered the related departments at the provincial level to fully support and guide the trial reform in Huizhou. Continue reading →

Posted in Business, FDI and Foreign Trade, Finance, Tax and Accounting, Legal and Regulatory, Regulatory Update, South China | Tagged China Legal, China Reform, China Regulatory, Enterprise Registration and Examination Reform, Guangdong, Huizhou, Huizhou Trial Reform, South China | Leave a comment

Severance Pay Subject to Individual Income Tax in China

May 18 – On May 14, officials from China’s State Administration of Taxation answered questions on several hot issues regarding ambiguities in tax payments, clarifying that individual income tax should be paid when an employee receives compensation for termination of their contract.

According to the government officials, if the one-time compensation offered to an employee after the termination of the contract does not exceed three times the local average annual salary of the previous year, the compensation is tax exempt. However, if the amount exceeds this threshold, then the exceeding part of the compensation is subject to individual income tax payment. Continue reading →

Posted in Business, Finance, Tax and Accounting, Legal and Regulatory, Regulatory Update | Tagged China Tax, Individual Income Tax, Severance Pay, State Administration of Taxation | Leave a comment

China Orders ‘Big Four’ Auditors to Restructure

China requires 60 percent majority Chinese partners upon JV term expiry, 80 percent by 2017.

Devonshire-Ellis: “This is a retrograde step”

May 15 – China’s Ministry of Finance, Administration for Industry and Commerce, Ministry of Commerce, State Administration of Foreign Exchange, and the China Securities Regulatory Commission jointly issued the “Scheme for Localized Transformation of Sino-foreign Cooperative Accounting Firms (hereinafter referred as the “Scheme”)” last Thursday. The Scheme requires the “Big Four” auditing companies of Deloitte Touche Tohmatsu, Ernst & Young, KPMG and PricewaterhouseCoopers to “localize” their staff in line with Chinese laws that specify the qualifications, age and experience of their management. Continue reading →

Posted in Business, Finance, Tax and Accounting, Legal and Regulatory, Regulatory Update | Tagged Accounting, Big Four, China Legal, China Regulatory, Deloitte, Ernst & Young, KPMG, PWC | 1 Comment

China’s PBC to Cut Reserve Rate Requirement by 0.5 Percentage Points

May 14 – The People’s Bank of China announced on May 13 that it would cut the amount of cash that banks must hold as reserves by 0.5 percentage points (50 basis points) recently released statistics pointed to a sharper-than-expected slowdown of the economy. The cut, which is the second this year following the first cut in February, will be effective from May 18, 2012.

With this latest adjustment, the bank reserve requirement ratio will be reduced from 20.5 percent to 20 percent for large banks, while smaller banks will be required to maintain 16.5 percent of reserves. Continue reading →

Posted in Business, Economy and Politics, Finance, Tax and Accounting | Tagged China Banking, China Economy, China Finance, China Regulatory, China Reserve Requirement Ratio | Leave a comment

Getting Money Out of China: Macau Casinos, Xinjiang Jade and French Wines?

Op-Ed Commentary: Chris Devonshire-Ellis

Not made to be worn

May 11 – The recent case over the alleged murder of Neil Heywood and the suggested transaction involving US$800 million of cash out of China to the United Kingdom has not been fully investigated by the media, not least because China has placed such a blanket of secrecy over the entire affair. Yet one question begs answering: if allegations Heywood was involved in a scheme to transfer illegally obtained money out of China, what were the routes, where was it intended to go, and if any was transferred, where is it now? Continue reading →

Posted in Finance, Tax and Accounting | Tagged Casinos, French Wine, Macau, Xinjiang Jade | Leave a comment

China Announces VAT Pilot Project for Agricultural Products

May 10 – The Ministry of Finance and the State Administration of Taxation issued on April 6, 2012 the “Circular on Measures for the Pilot Project of Assessment and Deduction of Input Value-added Tax (VAT) on Agricultural Products in Certain Industries (caishui [2012] No.38, hereafter referred to as ‘Pilot Project Circular’).

The Pilot Project Circular announces that, starting from July 1, 2012, VAT general taxpayers who purchase agricultural products as raw materials for the production and sale of liquid milk and dairy products, liquor and ethyl alcohol, or vegetable oil, will be able to deduct input VAT in accordance with methods provided in the Circular. Agricultural products refer to those primary products listed in the “Explanation of Taxable Scope of Agricultural Products (caishuizi [1995] No. 52).” Continue reading →

Posted in Finance, Tax and Accounting, Legal and Regulatory, Regulatory Update | Tagged China Tax, Ministry of Finance, State Administration of Taxation, VAT | Leave a comment

China RO vs. FICE

Op-Ed Commentary: Chris Devonshire-Ellis

May 9 – Recent changes to China’s tax treatment of representative offices (ROs) have started to infringe on the viability of using an RO as a vehicle for “investment” into China in terms of increasing financial pressure. While often stated as being an “investment” vehicle, alongside wholly foreign-owned enterprises (WFOEs) and foreign-invested commercial enterprises (FICE), the reality is that ROs have never been considered as a vehicle for foreign investment in the strictest sense. Continue reading →

Posted in Business, FDI and Foreign Trade, Finance, Tax and Accounting, Legal and Regulatory | Tagged China Legal Establishment, China Market Entry, China Tax, China VAT, FICE, Foreign-Invested Commercial Enterprise, Representative Office, RO, RO vs. FICE | Leave a comment

China Issues New Guidelines to Help Minimize Tax Uncertainty

May 8 – The State Administration of Taxation (SAT) published a notice regarding the “Working Guidelines on Replying to Specific Tax Matters (Trial) (guoshuifa [2012] No. 14, hereinafter referred to as ‘Guidelines’)” on February 10, 2012, which took effect from March 1, 2012.

China’s taxation system is rapidly developing, and with the increasingly complex economic environment, tax disputes are inevitable. Allowing taxpayers to interact with Chinese tax authorities and obtain replies on specific tax matters help minimize and mitigate tax controversies. The Guidelines set out a working guidance to standardize the internal procedures for the Chinese tax authorities to provide replies on specific tax matters. Continue reading →