Category Archives: Tax Law

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Circular on Pilot Tax Policies for Venture Capital Firms and Individual Angel Investors

In order to promote venture capital investment and to support small to middle sized business, the Ministry of Finance and the State Administration of Taxation have jointly promulgated the Circular on Pilot Tax Policies for Venture Capital Firms and Individual Angel Investors (Cai Shui [2017] No. 38 ) (the “Circular“) on April 28, 2017. The … Continue Reading

China SAT Releases Bulletin on CIT Treatment of Non-resident Enterprises’ Secondment Arrangement

By Carol Xu China’s State Administration of Taxation (“SAT”) released Bulletin [2013] No. 19, “Announcement on Issues Concerning Levying Corporate Income Tax on Services Provided by Non-residents through Seconding Personnel to China”《关于非居民企业派遣人员在中国境内提供劳务征收企业所得税有关问题的公告》 (“Bulletin 19”) to provide guidance on the treatment of non-resident enterprises’ individual secondment arrangement from the PRC corporate income tax (“CIT”) perspective.… Continue Reading

Big Four to Localize in China

By Amin Amirkia Earlier this month, China’s Ministry of Finance, State Administration for Industry and Commerce, Ministry of Commerce, State Administration of Foreign Exchange, and China Securities Regulatory Commission issued the Notice on Issuing the Scheme on the Localized Restructuring of Sino-Foreign Cooperative Accounting Firms (“Notice”), requiring the Big Four to “localize” their operations in … Continue Reading

Regulatory Challenges for the “Big Four”

By Amin Amirkia The “Big Four”, which dominate the Chinese market, are facing regulatory changes that could mean that only accountants with Chinese qualifications can be partners in their China-based audit practices. At the time of China’s accession to the World Trade Organization in 2001, the Big Four successfully lobbied to have an exception to … Continue Reading

China Clarifies and Expands Reporting Obligations of Foreign Enterprises on Indirect Equity Transfers

On March 28, 2011, China’s State Administration of Taxation (“SAT”) issued Announcement No. 24 regarding Several Problems of Regulation on Income Tax of Non-resident Enterprises (the “Announcement”), effective beginning April 1, 2011. The Announcement applies to all outstanding tax liabilities incurred but not paid before April 1, 2011.… Continue Reading

China Ends an Era of Special Tax Treatments for Foreign Companies and Individuals

Beginning December 1, 2010, foreign-invested enterprises, foreign enterprises, and foreign individuals are now required to pay the city maintenance and construction tax as well as the education surcharge, from which these entities and individuals were formerly exempt. Prior to this regulation, the PRC levied those taxes only on Chinese-owned and funded enterprises and Chinese citizens.… Continue Reading

Four Departments Jointly Clarify Tax Rules For Purchase Of Equipment by R&D Centers

On March 22, 2010, the Ministry of Commerce, State Administration of Taxation, General Admission of Customs and the Ministry of Finance jointly issued a circular (Shangzifa [2010] No. 93, "Circular 93") to clarify procedures for the examination and approval of tax exemptions and refunds for purchase of equipment in China made by foreign-invested R&D centers.… Continue Reading

China Issues the New Audit Regulation

China’s State Council has recently released the amended Regulations for the Implementation of the Audit Law of the People’s Republic of China (hereafter, the “New Audit Regulation”) applicable starting May 1, 2010. Compared with the amended Audit Law of the People’s Republic of China (hereafter, the “New Audit Law”), the New Audit Regulation sets forth … Continue Reading

China M&A Tax Issues – Installment 2: Ordinary versus Special Reorganizations in Share Deals and Asset Deals

The M&A rules recognize a deal as either an ordinary reorganization or a special reorganization, and different tax treatments apply accordingly. In terms of acquisitions, the major difference in tax treatment between ordinary and special reorganizations is the tax basis used for calculating the gain/loss from the transaction and the time point at which this … Continue Reading

China M&A Tax Issues – Installment I: Changes in Tax Rules

China’s new tax law went into effect in January of 2008. This development has had important effects on tax structures used by foreign investors doing mergers and acquisitions in China. It has influenced the strategies firms employ in pursuing “enterprise reorganization” projects involving domestic Chinese enterprises, including mergers, share acquisitions, and asset acquisitions among other … Continue Reading

China Issues New Tax Rules For Representative Offices Of Foreign Enterprises

On February 20, 2010, China’s State Administration of Taxation (the "SAT") issued a Notice On Interim Measures For Tax Administration Of Representative Offices Of Foreign Enterprises (Guoshuifa [2010] No. 18, also referred to as "Circular 18"). Circular 18 states measures governing enterprise income tax (EIT), business tax, and value added tax (VAT) on representative offices … Continue Reading

China Clarifies Concept of “Beneficial Owner” in Tax Agreements

On October 27, 2009, the Chinese State Administration of Taxation (“SAT”) issued a Notice, "How to Understand and Determine the ‘Beneficial Owner’ in Tax Agreements" (Circular No. 601, hereinafter referred as to the “Notice”). This Notice clarifies the definition of beneficial ownership for purposes of avoiding double-taxation and appropriately reducing tax burdens.… Continue Reading

Changes to China’s “Value Added Tax” as of October 2009

In October, 2009, two regulations were issued regarding value added tax (VAT) treatment in China. One regulation clarifies the value added tax (VAT) treatment of certain asset reorganizations between publicly traded companies (PTC) and their holding companies. The other exempts foreign-owned research and development (R&D) centers from taxes on imports of listed equipment and grants … Continue Reading

China Crystallizes Royalty Clause of Tax Treaty

China’s State Administration of Taxation (“SAT”) issued a Notice on the Issues concerning the Application of Royalty Clauses in Tax Treaties (Circular No. 507, hereinafter referred to as the “Circular”) on September 14, 2009. The Circular clarifies the definition and scope of royalty clause involved in tax treaties to avoid double taxation and to prevent … Continue Reading

China Clarifies Nonresidents’ Eligibility For Treaty Tax Benefits

On August 25, 2009, China’s State Administration of Taxation (SAT) issued Administrative Rules on Nonresident Enjoying Tax Treaty Treatment (Guoshuifa 2009 No.14) ("The Rules"). The Rules provide detailed guidance for nonresidents seeking concessions (except for international traffic) provided in applicable tax treaties. The Rules will take effect on Oct 1, 2009.… Continue Reading

Extended Tax Benefits for Cultural and Media Enterprises

On March, 27, 2009, China’s Ministry of Finance (“MOF”), State Administration of Taxation (“SAT”) and General Administration of Customs jointly issued Notice of Some Issues related to Taxation Policies on Supporting the Development of Cultural Enterprises (the "Notice"). The Notice extends a series of tax benefits for cultural and media enterprises through December 31, 2013.… Continue Reading

Taxation of Corporate Restructuring (II)

On April 30, 2009 the PRC Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Notice of Some Issues Associated with Income Tax Treatment of Enterprise Restructuring (Cai Shui [2009] No. 59) (“Notice 59”) relating to China’s tax treatment of certain corporate restructuring transactions. The rules introduced in Notice 59 have … Continue Reading

Taxation on Corporate Restructuring(I)

New tax rules relating to the tax treatment of certain corporate restructuring transactions are expected to be finalized soon by the PRC Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”). Under China’s pre-2008 foreign enterprise income tax (“FEIT”) regime, the SAT issued guidance on the tax treatment of corporate restructuring transactions, including … Continue Reading

China Introduces Tax Incentives for Clean Development Mechanism Projects

On March 23, 2009, China’s Ministry of Finance and State Administration of Taxation jointly issued a Notice on the Policy of Enterprise Income Tax for China Clean Development Mechanism Fund ("CCDMF") and China Clean Development Mechanism ("CCDM") Projects (hereinafter referred as to the “Notice”) to introduce new tax incentives for CCDM projects and the CCDMF. … Continue Reading

China Combats Tax Treaty Abuse

The role of income tax treaties is important at a time when international trade and transactions continue to increase. Countries enter into income tax treaties – also known as double taxation agreements or double tax treaties – on bilateral basis to prevent double taxation (i.e., taxes levied by both countries on the same income, profit, … Continue Reading
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