Tax & Accounting

Pilot Tax Policies for Venture Capital Enterprises and Individual Investors in China

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By Jake Liddle

Authorities recently announced tax incentives for venture capital enterprises (VCEs) and individual angel investors (AIs) making investments into tech startups. The incentives for VCEs and AIs are detailed in a joint circular detailing pilot tax policies produced by China’s Ministry of Finance (MOF) and the State Administration of Taxation (SAT).

Most notably, the circular provides similar tax incentives to both corporate and individual investors, irrespective of if individuals make investments as a partner of a limited partner VCE or as an AI. The preferential tax policies aim to promote and nurture venture capital investment.

While a part of China’s broader initiative to promote the development of small and medium sized enterprises (SMEs), the pilot program is a component of the US$55.2 billion in tax cuts approved by the government in April.

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China’s New VAT Fapiao Requirements to Affect Taxpayers, Service Providers

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By Jake Liddle

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China’s State Administration of Taxation (SAT) has released new requirements for collecting VAT fapiao, which are special tax invoices.

The policy, which will come into effect on July 1, 2017, will change the type of information taxpayers need to provide when obtaining a general VAT fapiao. It also specifies measures fapiao issuers (service providers) need to take to be compliant.

Both taxpayers and vendors should study the new general fapiao rules to understand how it affects business as usual:
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China’s Accounting Standards: Chinese GAAP vs. US GAAP and IFRS

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By Dezan Shira & Associates
Editor: Weining Hu

According to PRC Company Law and other relevant regulations, it is compulsory for all types of Foreign Invested Enterprises (FIEs) in China to comply with  statutory annual audit and other compliance processes.

The completion of annual statutory audits and settlement of all relevant tax liabilities are prerequisites for FIEs to distribute and repatriate their profits or dividends back to their home country. Failure to do so may result in extra expenses, penalties, or even revocation of their business license.

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China’s ‘Fapiao’ Invoice System Explained

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By Dezan Shira & Associates
Editor: Weining Hu

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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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