Finance, Tax and Accounting

Tax Implications of a Service Permanent Establishment

By Eunice Ku and Shirley Zhang

May 20 – With an increasing number of foreign enterprises starting to conduct business in China, tax liabilities resulting from business activities within the country are fast becoming an issue of key concern. If an establishment or venue of a non-resident enterprise constitutes a service permanent establishment (PE) in China, it will be subject to 25 percent CIT on all of its China-sourced income, as well as non-China sourced income that has an actual connection to the PE. We outline what constitutes a service permanent establishment in the current issue of China Briefing Magazine “Understanding Permanent Establishments in China,” which is available as a complimentary download on the Asia Briefing Bookstore through the end of the month. Continue reading →

Posted in Business, FDI and Foreign Trade, Finance, Tax and Accounting | Leave a comment

Triggering Permanent Establishment Status in China

By Eunice Ku and Shirley Zhang

Understanding-Permanent-Establishments-in-China May 15 – For foreigners doing business in China, tax is always a key concern. As a foreign business or individual, income derived from China may be subject to taxes in both your home country and China, which could substantially increase your tax burden.

Under China’s Corporate Income Tax (CIT) Law, a non-resident enterprise (i.e., an enterprise organized outside of China and whose effective management is not within China) without an establishment or venue in China is subject to CIT at a withholding rate of 10 percent on their China-sourced income, which includes:

Income from property transfers;
Income from equity investment such as dividends and bonuses;
Income derived from interests, rentals and royalties;
Income derived from donations; and
Any other income. Continue reading →

Posted in Business, FDI and Foreign Trade, Featured, Finance, Tax and Accounting, Legal and Regulatory | 1 Comment

China Issues Announcement on Individual Income Tax Declaration Forms

May 14 – China’s State Administration of Taxation (SAT) issued the “Announcement on the Individual Income Tax Declaration Form (Announcement [2013] No.21, hereinafter referred to as the ‘Announcement’)” on May 9, which is scheduled to take effect on August 1, 2013. The Announcement has made revisions to the current individual income tax (IIT) declaration system in the following three areas:

Strengthening tax information collection
Streamlining declaration forms and simplifying declaration content
Unifying standards regarding declared data Continue reading →

Posted in Finance, Tax and Accounting, Legal and Regulatory, Regulatory Update | Leave a comment

China Briefing Releases ‘The China Tax Guide: Tax, Accounting & Audit (Sixth Edition)’

May 13 – China Briefing, in cooperation with its parent company Dezan Shira & Associates, has just released the sixth edition of The China Tax Guide: Tax, Accounting & Audit. Taxation permeates business transactions in China, and a strong understanding of tax liabilities enables foreign investors to maximize the tax efficiency of their foreign investment while ensuring full compliance with all tax laws and regulations. This guide overviews taxes for businesses and individuals, and discusses accounting and audit in the China business context.

This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.

Continue reading →

Posted in Business, FDI and Foreign Trade, Featured, Finance, Tax and Accounting, Legal and Regulatory | Leave a comment

China Issues Announcement on Corporate Income Tax for Non-resident Enterprises

May 8 – China’s State Administration of Taxation (SAT) released the “Announcement on Issues Concerning Corporate Income Tax on Labor Services Provided in China by Non-resident Enterprises (Announcement [2013] No. 19, hereinafter referred to as the ‘Announcement’)” on April 19, which is scheduled to take effect on June 1, 2013. Detailed information can be found below. Continue reading →

Posted in Finance, Tax and Accounting, Legal and Regulatory, Regulatory Update | Leave a comment

China Releases Catalog of Encouraged Industries for Qianhai Cooperation Zone

May 8 – China’s National Development and Reform Commission (NDRC) released the “Catalog of Encouraged Industries for the Qianhai Shenzhen-Hong Kong Modern Services Industry Cooperation Zone (Qianhai Cooperation Zone) (hereinafter referred to as the ‘Catalog‘)” on March 6, 2013. The Catalog covers 112 encouraged industries that fall under the below six service industries:

Finance
Modern logistics
Information services
Technology services
Professional services
Public services Continue reading →

Posted in Business, Finance, Tax and Accounting, Legal and Regulatory, South China | 1 Comment

Representative Offices as Permanent Establishments in China

May 7 – Representative offices (ROs) are taxed as permanent establishments in China. The “Interim Measures for the Administration of Tax Collection against Permanent Representative Offices (ROs) of Foreign Enterprises (guoshuifa No. 18 [2010])” issued by the State Administration of Taxation generally provides that ROs are required to pay corporate income tax on its profits, as well as business tax and value-added tax, which usually amounts to a liability of approximately 11 percent to 12 percent of the total expenses of the RO. ROs are required to keep proper accounting records to ascertain their actual revenues and profits and also accordingly file taxes. Continue reading →

Posted in Business, FDI and Foreign Trade, Finance, Tax and Accounting | Leave a comment

New Issue of China Briefing: Understanding Permanent Establishments in China

Understanding-PE-Establishment-in-China-250 May 2 – The new issue of China Briefing Magazine, titled Understanding Permanent Establishments in China, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the month of May.

With more and more foreign enterprises conducting business in China, the tax liabilities resulting from business activities in the country are becoming an issue of key concern. Many foreign enterprises doing business in China are unaware that their business activities here may constitute a permanent establishment (“PE”) and are thus subject to corporate income tax.

In recent years, China’s tax authorities have tightened the tax administration of secondment arrangements in which the HQ sends staff to work in China. Overseas parent companies might be challenged that their actions constitute provision of services to their China subsidiary and hence creation of a Service PE in China. Continue reading →