Viewpoints from Kaizen

1. Determination of Tax Liability Depending on the Length of Residence With respect to foreign individuals who are not domiciled but work in China, their tax liability shall be determined by the length of residence and the income earned by virtue of an office or employment within China in a tax year (year of assessment). (1) Determination of tax liability where the length of residence is not more than 90 days or 183 days Concerning the determination of individual tax payers with no residence within the territory of China but who, within a tax year, live continuously or for an accumulated period of no more than 90 days within the territory of China, or who live continuously or for an accumulated period of no more than 183 days within the territory of China during the period as set in the tax agreement, the wage and salary for the individuals with […]

1. The Concept of Taxpayer Taxpayer is also called as tax main body who takes the responsibilities of paying tax. The taxpayers for individual income tax refer to the units or individuals who burden the direct tax obligations in accordance with tax law. (hereinafter referred to as the Tax Law). In accordance with Articles 1 and 8 of the Individual Income Tax Law of the People’s Republic of China (PRC), the taxpayers of individual income tax include individuals who have domicile in China, or though without domicile, yet have resided for one year or more in China on their income derived from sources within and outside China and individuals who are neither domiciled nor resident in China, or who are not domiciled and resident for less than one year in China on their income derived from sources within China. The taxpayers include exactly: (a) Individual Chinese citizens and individual industrial […]

China’s top legislature adopted the Social Insurance Law (the Law) of the People’s Republic of China on October 28, 2010. This will come into effect as of July 1, 2011.     Prior to 2007, China had no specific national law for social insurance. The Law was first reviewed in December 2007 and was further reviewed 4 times before adoption. Although the Labor Law of China then specified that employees should enjoy rights in social insurance, the local governments had different interpretations and execution standards, some employers did not pay or paid less than the social insurance fee they were supposed to pay for their employees and some migrant workers were not willing to pay for it as they didn’t understand for the benefits. This newly enacted Social Insurance Law is the first legislation for a social insurance system in China and is of great significance to overcome the obstacles […]

Taxation of the Chief Representative of a Representative Office in China Scenario Mr. A, the chief representative of the US Corp Shanghai Representative Office. Mr. A is based in the United States of America but is required to make regular trips to Shanghai. As such, he is liable to pay Individual Income Tax in the People’s Republic of China from the time he assumed the chief representative position. Every month, he must declare his income and pay PRC income tax, as from the start of his appointment. Mr. A’s tax liability is determined by apportioning his total wages and salary according to the amount of time he spends inside and outside China in any given month.   Calculating the Amount of Income Tax The basis for calculating Mr. A’s monthly income tax is as follows: (Total Salary for the Month x # of Days Spent in China) / # of […]

On 15 March 2019, the Foreign Investment Law of the PRC was adopted by the second session of the 13th National People’s Congress, the country’s top legislature, which will come into force on 1 January 2020. The PRC Law on Sino-Foreign Equity Joint Ventures (the “EJV Law”), the PRC Law on Sino-Foreign Contractual Joint Ventures (the “CJV Law”) and the PRC Law on Foreign-Capital Enterprises (the “WFOE Law”) will be repealed simultaneously. The Foreign Investment Law of the PRC consist of 42 articles, which includes 6 chapters, i.e. General Provisions, Investment Promotion, Investment Protection, Investment Administration, Legal Liabilities and Supplementary Provisions. The provisions of the new law are mostly principled or macroscopic. It is merely a fundamental law for foreign investment in China. A series of related supporting regulations shall be formulated in order to implement the new law. This article hereby presents a brief analysis of the possible changes […]

Consular legalization is the formality by which the diplomatic or consular organ affirm the reliability of the final signature and seal on a notarial certificate or document executed by relevant organ. Consular legalization enables the notarial certificate or relevant document to be recognized as valid in another country. In accordance with international practices, diplomatic or consular organ is responsible only for the authenticity of the signature and seal of the notary office and those of the relevant organ placed on the document while the organ concerned who accepts the document shall be responsible to examine the authenticity and legality of the content of the document.   I. China’s Consular Legalization organs The Consular legalization organs in China are the Consular Department of the Ministry of Foreign Affairs and Foreign Affairs Offices of relevant provinces, autonomous regions and municipalities directly under the central government. Chinese Embassies and Consulates in foreign countries […]

Legalization means the authentication of a signature or seal / stamp appearing on a document to make the document acceptable in the legalising country.   To have a document which originates in the United Kingdom accepted in the People’s Republic of China, you need to go to the Legalization Office of British Foreign and Commonwealth Office (Old Admiralty Building, Whitehall, London SW1A 2LG, Tel: 020 70081111, Fax: 020 70081010, the opening hours will remain 9:30 a.m. to 4:00 p.m.) to legalize the signature or seal of a British public official-such as solicitor, notary public, registrar, official of Chambers of Commerce. Then send it to this office to legalize the signature of official of British Foreign and Commonwealth Office.   Usually, the following documents are essential: Legalization Application Form; The original document to legalize and its photocopy; Copy of applicant’s passport or company’s details; Any other documents if this consulate thinks […]

The Chinese Embassy and Consulates authenticate documents which are executed in the United States and will be used in China. Type of documents include birth/death certificates, power of attorney, marriage certificates, diplomas, adoption application papers, business license, etc. Authentication is also called certification or legalization sometimes.   Procedures: Sign before a notary public. Certified by the Secretary of the State Office of the state where the document is executed.   *Some states require the notarized document to be sent to the notary public’s county clerk for verification before presenting to the Office of Secretary of State. Please contact Secretary of State Office of the state where your document is executed for details. **Certain government or court document can be certified directly by the Office of Secretary of State, like Court Decree, Marriage License, Birth Certificate, etc. Please contact Secretary of State Office of the state where your document is executed […]

1. General Principal Where the permanent representative offices (ROs) provide intermediary, agenting services that generate income in the form of commission, kickbacks, services charges and remuneration, business taxes should be assessed based on the income; the tax rate is 5 per cent. The enterprise income tax is levied at a rate of 30 per cent and local income tax at a rate of 3 per cent. The taxable income is computed in one of the three ways as appropriate, i.e., levying upon actual income, assessing the income or taxable income, and compile taxable income according to corresponding expenses.   2. Levying upon actual income Where the permanent ROs are able to provide contracts and all the other documents required (on the commission rate for example), maintain account books on income and expense and present the certificates from local public certified accountant on overseas expenditures, upon the approval of the tax […]

On 16 April 2004, the Ministry of Commerce (“MOC”) promulgated a new regulation, namely, The Administrative Measures Governing Foreign Investment in Commercial Sectors (“the Administrative Measures”). Foreign investor is permitted to set-up wholly owned enterprise engaging in commission agency, wholesaling or retailing businesses in China with a much lower threshold requirement effective from 11 December 2004. Furthermore, geographical restrictions on the locations for setting up the foreign-invested wholesaling and retailing enterprises will be abolished after 11 December 2004.   Definition of Foreign-Invested Commercial Enterprises (“FICE”) Article 3 of the Administrative Measures defines FICE as enterprises established by foreign investors to engage in commission agency services, wholesaling, retailing or franchising businesses. Please note that although franchising is included as one of the permitted scope of businesses for FICE, article 19 of the Administrative Measures requires foreign investors engaging in franchise licensing to comply with other related laws promulgated by the government. […]