China’s 2011 Tax Revenue from Non-resident Enterprises Hits Record High

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Non-resident enterprises should be careful about their financial strategies to avoid unexpected and unnecessary tax exposure in China

Mar. 13 – China’s State Administration of Taxation (SAT) announced that its tax revenue from non-resident enterprises (NREs) reached RMB102.6 billion (US$16.16 billion) in 2011, exceeding RMB100 billion for the first time and reporting a 31.8 percent increase from a year earlier. Although this amount only accounts for roughly 1.1 percent of China’s total tax revenue last year, the high growth rate underscores the government’s increasing attention to this particular group of taxpayers.

Among a variety of taxes collected from NREs, corporate income tax (CIT) plays a major role and takes up around 85 percent of the group’s total tax imposition. NREs’ total CIT contributions in 2011 reached RMB87.2 billion, seeing a rapid increase of 38.4 percent from 2010. Continue reading…

China’s Tax Avoidance Crackdown Targets MNCs

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Mar. 1 – The profitability of multinational corporations (MNCs) will be the main focus of Chinese tax authorities during the annual inspection of related-party transactions in 2012, according to a recent report by Shanghai Securities News.

China’s State Administration of Taxation (SAT) aims to establish a comprehensive enterprise index system this year, which will contain nationwide information on both related-party transactions and contemporaneous documentation. Based on the system, the SAT will conduct comparative analyses on related-party transactions conducted in different industrial sectors, tax years, and geographical areas. Continue reading…

Transfer Pricing Key Topic at 5th Int’l Taxation Conference in Beijing

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Dec. 7 – An important area of focus during the Fifth International Taxation Conference in Beijing last week was the issue of transfer pricing and its implications for enterprises with subsidiaries in China – an area of regulation that is becoming increasingly complex. To help readers navigate these regulations, China Briefing dedicated its entire November edition to tackling the tax implications of cross-border transactions and transfer pricing documentation. Continue reading…

Contemporaneous Transfer Pricing Documentation in China

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By Dezan Shira & Associates and Steven Carey at Transfer Pricing Associates

Nov. 8 – With the release of comprehensive transfer pricing regulations in early 2009, China’s tax authority – The State Administration of Taxation (SAT) – sent a very clear signal that it is serious about protecting its revenue base and actively enforcing the arm’s length principle for pricing of intragroup transactions, e.g. transactions between a headquarters overseas and its wholly foreign-owned enterprise (WFOE) in China.

These regulations introduced a mandatory requirement for taxpayers to prepare, submit and retain transfer pricing documentation to support the arm’s length nature of their related party transactions. Continue reading…

New Issue of China Briefing: Transfer Pricing and Cross-Border Inter-Company Transactions

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Nov. 2 – The new issue of China Briefing magazine, titled Transfer Pricing and Cross-Border Inter-Company Transactions, is out now.

In this issue, we discuss cross-border inter-company transactions (pre and post-establishment) and the documentation you will need to submit to keep up with the increasingly powerful transfer pricing regulation implementation in China. The potential complexity involved in these transactions means that they are sources of confusion to many China investors.

We provide some pointers to help investors navigate these complex issues by first addressing the payment arrangements among HQs, WFOEs and clients in China, as well as each arrangement’s tax implications. We include the specific steps a WFOE in China has to undergo in order to remit funds between its headquarters and clients, and alert investors as to when transfer pricing issues and duplicate taxation issues are triggered. Continue reading…

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