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

Posted by Reading Time: 2 minutes

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.  

For the purpose of the Announcement, a “non-resident enterprise” refers to an enterprise either:

  1. Established according to foreign (regional) law, whose management organization is not based within the territory of China and has no offices or business premises in China, however, the enterprise receives income sourced from Chinese territory; or
  2. Where offices and business premises have been established, but the relevant income has no actual connection to such offices and premises.

According to the Announcement, for non-resident enterprises dispatching personnel to China to provide labor services (hereinafter referred to as “dispatching enterprises”), if they frequently examine and assess the performance of the dispatched personnel and are wholly or partially responsible for the performance of such personnel, the dispatching enterprises shall be deemed as having established offices or premises in China.

Where the dispatching enterprises are enterprises of a contracting country under a relevant tax treaty, and have relatively fixed and permanent offices or premises to provide labor services, such offices or premises shall be deemed as permanent offices established in China.

The above-mentioned dispatching enterprises shall pay corporate income tax and handle other tax related issues according to the relevat laws and regulations.

However, if dispatching enterprises send personnel to China only to exercise shareholders’ rights in receiving enterprises (enterprises which receive the labor services), or protect the legitimate rights and interests of their shareholders in receiving enterprises, then such enterprises shall not be deemed as having established offices, premises or permanent offices in China. Activities to fulfill the above-mentioned purposes including:

  • Providing investment suggestions to receiving enterprises
  • Participating in receiving enterprises’ general meetings of shareholders or directors’ meetings

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email china@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across Asia by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

Understanding Permanent Establishments in China.
This month’s China Briefing Magazine casts some light on permanent establishment status in China by discussing the circumstances triggering a PE in China, focusing on Service PEs. We also discuss the tax implications for a non-resident enterprise where its activities in China constitute

Income Tax Withheld at Source for Non-Resident Enterprises

China Clarifies Corporate Income Tax Treatment for Non-Resident Enterprises under VAT Reform