Tax & Accounting

Understanding China’s ‘Fapiao’ Invoice System

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By Dezan Shira & Associates
Editor: Weining Hu

Fapiao top banner-01

Fapiao is the first Chinese word many foreign businesspeople learn when they visit China. A fapiao is a legal receipt that serves as proof of purchase for goods and services. The larger fapiao invoice system, however, is an essential component of China’s tax law, and compliance for businesses.

China’s tax authorities require businesses to use fapiao to compel companies to pay tax in advance on their future sales. In this way, fapiao serve as a paper warranty against tax evasion, unlike other countries where invoices serve as a tax receipt.

The State Administration of Tax (SAT) prints, distributes, and administers fapiao. These authorities then require all businesses to purchase relevant fapiao, according to their business scope.

Foreign businesspeople and companies should take the time to understand the fapiao system: individuals need fapiao to reclaim business expenses, while companies must record all business transactions on a fapiao. A solid understanding of the system is therefore a critical requirement.
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Individual Income Tax for Expats in China

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By Dezan Shira & Associates
Editor: Jake Liddle

China’s Individual Income Tax (IIT) Law stipulates that all individuals working and deriving income from within the territory of China are subject to IIT.

While Chinese nationals are taxed on all income sourced both domestically and overseas, non-Chinese nationals are only taxed on income deriving from within China.

An individual’s salary is taxed according to progressive rates, while other types of income are taxed at variable rates depending on their nature.

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Transfer Pricing Investigation in China: Understanding the Latest Adjustments

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By Dezan Shira & Associates
Editor: Tongyu Zhang

New transfer pricing regulations issued by the State Administration of Taxation (SAT), the Measures for Administration of Special Tax Investigation Adjustment and Mutual Agreement Procedures (“the Measures”), came into effect on May 1, 2017.

The Measures consolidate China’s pre-existing regulations regarding self-adjustment and outbound payments with the new transfer pricing laws introduced in June 2016. In addition, the Measures integrate elements of the international BEPS program, such as regulations relating to intangibles, transfer pricing, and mutual agreement procedures, into domestic regulations.

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China Announces US$55.2 billion in Tax Cuts

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By Alexander Chipman Koty

China has approved RMB 380 billion (US$55.2 billion) worth of tax cuts for businesses and individuals, according to a State Council statement on April 19. The new tax cuts are part of a bid to boost economic growth by reducing the tax burden on businesses and encouraging consumption.

The tax cuts simplify the value-added tax (VAT) system, reduce rates for small and medium sized enterprises (SMEs), offer incentives for certain industries, and increase health insurance deductions. The measures follow Premier Li Keqiang’s pledge in the annual Work Report in March to cut corporate taxes by RMB 350 billion (US$50.7 billion) and business fees by RMB 200 billion (US$29 billion) in 2017.

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Tax, Accounting and Audit in China 2017 – New Publication from China Briefing

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Tax guide 2017

The Tax, Accounting, and Audit in China 2017 is now available for download in the Asia Briefing Publication Store. The guide offers a comprehensive overview of the major taxes that foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, and pragmatic guide is ideal for business leaders who must navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.

Given China’s idiosyncratic legal system, which is quite different to those in Western countries, a strong understanding of China’s tax liabilities enables foreign investors to maximize the tax efficiency of their overseas investments while ensuring full compliance with the country’s tax laws and regulations.

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China’s Tax Residency Certificate: Implications for DTA Benefits

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By Dezan Shira and Associates
Editors: Alan Hervé and Thibaut Minot

When transacting with China, a foreign company’s ability to benefit from Double Tax Agreements (DTAs) often depends on the cooperation and competency of the Chinese party to effectively complete Certificate of Tax Residency (CTR) application procedures.

Although the application process for obtaining a CTR is relatively straightforward, delays and setbacks are not uncommon. The application process is localized, yet it has cross-border implications that overseas investors should consider.

Using a concrete case study, this article demonstrates the importance of filing timely CTR applications in China and sheds light on the application process itself.

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Calculating Taxes and Duties for Import into China

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By Dezan Shira & Associates
Editor: Jake Liddle

Companies planning to either sell or import goods to China should have a strong understanding China’s import tax environment before signing sales contracts.

Importing goods to China implicate three types of taxes – customs duties, value-added tax (VAT), and consumption tax (CT) – depending on the nature of the imported good and whether it falls under CT specified categories.

The amount of import tax liability and who is ultimately responsible for paying them generally depends on how the sales contract is concluded between buyer and seller.

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Withholding Tax in China

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By Dezan Shira & Associates
Editor: Jake Liddle

In China, withholding tax (WHT) is levied on the income of foreign enterprises that do not have a physical establishment in China but provide services to China-based businesses. Any China-derived income arising from such a transaction between an overseas entity and a Chinese business is withheld by the China-based client, deducted from the gross income amount, and taxed by the Chinese tax authorities at a flat concessionary rate of 10 percent.

Thus, it is the responsibility of the China-based client to ensure the transfer of tax onto the tax bureau. If they fail to do so, or do not pass on the correct or relevant amount from an invoice, the local tax bureau will take up repayment with the China-based client, and not the overseas entity.

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Dezan Shira & Associates

Meet the firm behind our content. Dezan Shira & Associates have been servicing foreign investors in China, India and the ASEAN region since 1992. Click here to visit their professional services website and discover how they can help your business succeed in Asia.

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