Tax Regulations for Non-Resident Enterprises

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Mar. 3 – The State Administration of Taxation (SAT) has issued the tax regulations for non-resident enterprises that do business and have establishments or places of business in China. Tax registration and filing for non-resident enterprises in China is set to begin from March 1, 2009 while 2008 corporate income tax filing should be done by May 31, 2009.

Under SAT’s “Decree 19 on Provisional Administrative Measures Governing Tax Collection on Contracted Projects and Provision of Services by Non-resident Enterprises,” companies that contract in projects or provide services in China should register with the tax bureau where the project is located within 30 days of finalizing the contract. Companies should then register again within 15 days after the project has been completed.

Local companies and individuals that outsource projects to non-resident enterprises should submit contract/service related documents, tax registration certificate of the non-resident enterprises and other relevant documents to the bureau within 30 days after contract signing. In the event that details of the contract are revised, non-resident enterprises should report the changes to the tax bureau within 10 days after. Moreover, companies are also required to report their billing status and submit documents within 30 days of receiving billing.

Local companies and individuals that are required to withhold tax must register with the tax bureau where the project is located within 30 days from the start of the withholding obligation. Depending on the instructions from the tax bureau, non-resident enterprises can be the corporate income tax, business tax and value-added tax withholding agents.

Non-resident enterprises are required to submit their corporate income taxes both quarterly and annually in addition to also settling tax payments upon completing their projects. If a non-resident enterprise does not register and submit the needed documents to the tax bureau, they shall be excluded from preferential treatments of tax treaties.

Non-resident enterprises with business or value-added taxable activities and with places of business in China should file and pay BT or VAT themselves. Those with no place of business should have their withholding agents complete the filing and payment process. Non-resident enterprises or PRC outsourcers should submit necessary document to the tax bureau within 30 days of signing the contract, or they should withhold BT and VAT for the non-resident enterprises.

In the event that non-resident enterprises are not able to pay their tax on time, the local tax bureau is authorized to collect information on other income derived by the enterprises in China and charge overdue tax and interest surcharges from the other income items.

The “Administrative Measures on Final Settlement and Payment of Enterprise Income Tax for Non-resident Enterprises, Circular 6,” dictates that non-resident enterprises that have establishments or places of business in the country are still required to pay corporate income tax regardless of whether they make a loss or profit.

Other details include:

– Non-resident should submit annual EIT returns to the tax bureau and complete annual EIT filing within five months of the end of a year.
– Non-resident enterprises that stop business in the middle of a year should complete EIT filing within 60 days of termination.

Non-resident enterprises that meet the following criteria are exempt from annual filing:

-The contract in China lasted less than one year and ended in the middle of a year, and the relevant taxes have been fully settled.
-The non-resident enterprise completes de-registration procedures during the annual filing period.
– When a non-resident enterprise fails to complete annual filing in time, the tax bureau may charge a penalty worth between RMB2,000 and RMB10,000. During this time, the annual tax payable will be confirmed and the company will be advised to settle this amount within a specified period.
– Other situations as approved by tax bureau.

Dezan Shira & Associates is a fully licensed accounting practice in China and offers legal, tax accounting, due diligence and audit services for multinational clients in China, Hong Kong, Vietnam and India. The firm offers value-added tax assistance and recovery; for inquiries or more information, please contact or visit