AmCham South China releases Special Report on the State of the Business in China

GUANGZHOU, March 12 – The American Chamber of Commerce in South China launched its 2010 special report on the state of the business in South China and a white paper on the business environment in China yesterday.

The special report details the results of a study conducted by AmCham South China among their members from December to February 2010, with the aim of reporting the pulse of the current economic situation. It also presents an in-depth economic overview of the Guangdong, Fujian, Guangxi, Hainan, Hong Kong and Macau provided by the foreign investment consulting firm Dezan Shira & Associates. Read the rest of this entry »

SAT Clarifies Implementation Issues for Corporate Income Tax

Mar. 12 – On February 22, the State Administration of Taxation published Circular 79 in an effort to clarify certain technical issues for corporate income tax purposes including the timing of income recognition, tax treatments for certain expenses, and the determination of tax basis for fixed assets.

This clarification relates tax treatment for expenses including those related to tax-exempt income, start-up expenses and business entertainment expenses. Read the rest of this entry »

Illegal Use of Company Chops Seemingly Endorsed in Beijing Court Ruling

Mar. 10 – A court in Beijing has awarded an employee of a foreign-invested advertising company RMB400,000 for wrongful dismissal after the employee was fired when she established a trade union using the company’s chop without permission, China National Radio reported on Tuesday.

The former human resources manager at R&D Advertising in Beijing, identified as Ms. Cui, sued the company last year, alleging that the company had fired her because of her union role. Read the rest of this entry »

New Board to Bring Major Multinational Firms to Mainland Soon

Mar. 10 – The Shanghai Stock Exchange completed draft listing and trading rules of its international board which will allow overseas companies to float shares in China’s A-share market, SSE Chairman Geng Liang said on Monday.

The draft rules are completed, but they are still working on the details, and the revised rules will be available for public comment soon, according to Geng. Read the rest of this entry »

RO Chief Representatives May Consider Power of Attorney in Tax Questioning

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 »

China to Loosen Publishing Laws

Mar. 9 – China is set to permit private investors to take a role in mainland publishing, the first time this will be permitted since the Communist party came to power in 1949.

China’s General Administration of Press and Publication stated last year that it would dilute the monopoly held by state publishing companies and to allow private publishers into the mainland market. This has now manifested itself in projected moves to bring the largest publishing house, China Publishing Group, to an IPO in Shanghai later this year in an offering expected to raise US$265 million. Read the rest of this entry »

Morgan Stanley Divests Assets as Mainland Property Growth Rises 16%

Mar. 9 – Morgan Stanley is divesting its mainland China property assets and has sold off US$700 million worth of assets in the past year, the latest being its 50 percent holding in a Foshan residential project, which it has sold back to the developer for US$25million.

Other sales that have taken or are taking place include Infinity Plaza, the Xujiahui Shama serviced apartment block, and Nanjing Road’s Exchange mall, all in Shanghai. This comes as mainland property growth rose 16.1 percent, with sales increasing 42.1 percent year on year. Over 930 million square meters of property were sold last year. Read the rest of this entry »

China Curbs Property Speculation to Avert Real Estate Bubble

Mar. 8 – Whether or not it is an appropriate time to launch a property tax and curb skyrocketing housing prices in China has aroused hot debate at the annual sessions of the National People’s Congress, China’s top legislature, and the Chinese People’s Political Consultative Conference, the top advisory body.

China reintroduced a nationwide real estate sales tax last November in an attempt to reduce speculation and cool the bubbling property market after price rises accelerated across the country. Read the rest of this entry »

China RO vs. FICE

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

Mar. 5 – Recent changes in China’s tax treatment of representative offices in the country have started to push the viability of using RO as a vehicle of “investment” into China in terms of increasing financial pressure.

While often stated as being an “investment” vehicle, alongside wholly foreign-owned enterprises and foreign-invested commercial enterprises, the reality is they have never been considered as a vehicle for foreign investment in the strictest sense. Firstly, there is no capitalization requirement, and therefore no “investment” by the foreign owner, and secondly, because they were not permitted to trade (trading may be allowed for ROs following new regulations issued in February, but this has not been clarified yet). Read the rest of this entry »

SAT Increases Deemed Profit Rates for Non-Resident Enterprises

Mar. 5 – The State Administration of Taxation has increased the corporate income tax deemed profits rates for non-resident enterprises carrying out services or projects in China.

Under Guoshuifa [2010] No. 19, issued on February 20, unless a resident enterprise is able to provide accurate accounting records, CIT liability for services or projects carried out in China will be determined using the following methods of calculating deemed profits: revenue, costs and operating expenses. Read the rest of this entry »

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