Viewpoints

3.1 Basic Regulations 3.1.1 For enterprises with foreign investment and foreign enterprises with establishments and sites in China, the amount of taxable income on the total income each year from those establishments and sites, shall be the amount remaining from gross income for that year after costs, expenses and losses have been deducted. (ZHU XI LING [45] 1991.4.9)   3.1.2 The losses incurred in a tax year by an enterprise with foreign investment or by the organizations or sites established by a foreign enterprise in China for production or business operations, may be offset against income in the following tax year. Where the income of the following year is not sufficient to offset those losses, the balance may be offset against income of subsequent years, over a period not exceeding 5 years. (ZHU XI LING [45] 1991.4.9)   3.1.3 Where the financial and accounting principles adopted by an enterprise with […]

2.1 Enterprises with foreign investment which establish their head office in China shall pay Income Tax on the income derived from sources inside and outside China. Foreign enterprises shall pay Income Tax on income derived from sources within China. (GUO WU YUAN LING 1991.6.30)   2.2 ‘Head office’ in Article 3 of the Tax Law refers to the central organization of an enterprise with foreign investment which is organized in China as an enterprise legal person according to the laws of China, and which is responsible for the administration, operation and control of that enterprise. (GUO WU YUAN LING 1991.6.30)   2.3 ‘Income derived from sources inside China’ in Article 3 of the Tax Law refers to: A. Income from production and business operations of enterprises with foreign investment and by foreign enterprises which have established organizations or sites in China, as well as profits (dividends), interest, rental income, royalties […]

1. Taxpayers and Tax Levy Objects 1.1 Basic Regulations 1.1.1 Enterprises with foreign investment who earn income from production, business operations and other sources, within the borders of the People¡¦s Republic of China, shall pay Income Tax according to the provisions of this Law. Foreign enterprises who earn income from production, business operations and other sources, within the borders of the People¡¦s Republic of China, shall pay Income Tax according to the provisions of this Law. (ZHU XI LING [45] 1991.4.9)   1.1.2 Enterprises with foreign investment in this Law, refers to Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and wholly foreign-funded enterprises established within the borders of the People¡¦s Republic of China. Foreign enterprises; in this Law, refers to foreign companies, enterprises and other economic organizations which have established organizations or sites within the borders of China and engage in production or business, and those which, though not […]

Calculations of China Stamp Duty Stamp duty is based on the nature of the taxable documents, either the amount of payment, fees or revenue listed on the taxable documents or the number of pieces of the taxable documents and computed by using the statutory applicable tax rate or amount of tax per unit. The formula for calculating the amount of tax payable is: Tax payable = amount of payment (or fees or revenue) indicated in taxable documents applicable rate Tax payable = number of pieces of taxable documents amount of tax per unit Where the payment indicated in the taxable documents is in foreign currency, it should be converted into Renminbi according to the exchange rate quoted by the people’s bank of China on the date of signing the documents, and then the amount of tax payable is computed on that Renminbi basis. List of Documents Exempted from Stamp Duty […]

1. Introduction The term of a Representative Office normally is one year only. The investor could apply to have its Representative Office deregistered before its term expired. If the RO of a foreign enterprise wishes to terminate its business operations upon or before the expiration of its term; or if the parent company of the RO declares bankruptcy, a mandatory process called de-registration has to be done at the registration office. Documents have to be submitted to relevant authorities such as the tax authorities, Customs and banks to certify the clearance of the entity’s liabilities. This is a prerequisite to obtaining the approval for de-registration and cancellation of the certificate of registration. Should the RO leave any matter unsettled, the foreign enterprise or economic organisation represented by the RO shall be held responsible.   2. China Representative Office Deregistration Procedures (1) De-registration of Tax Certificate Step 1: Apply to the […]

1. Introduction A representative office (RO) is not an independent legal entity but an extension of the parent entity. Therefore, it must confine its activities to promotion or acting as a liaison and coordination office on behalf of its parent company. Generally, an RO is not allowed to carry out trade and businesses activities or sign sales contracts with customers. The parent entity will fund its operations and appoint a Chief Representative. One exception is the ROs of law firms which are allowed to conduct sales upon approval from the relevant authorities.   2. Accounting and Tax Requirements for Representative Offices (1) Keeping of Accounting Books, Records & Supporting Documents All accounting vouchers, ledgers as well as financial statements should be prepared and maintained under PRC GAAP (Generally Accepted Accounting Principles). Source documents, Journal Vouchers (JVs) and ledgers should be in Chinese and Standard China Chart of Accounts (COA) should […]

1. Procedures for changing the chief representative, business scope, name and office address (1) Changing chief representative or adding representatives • Provide the application letter for changing the chief rep signed by the chairman or general manager of the enterprise; • Provide the Authorization and Appointment letter of (chief) representative signed by the chairman or general manager of the enterprise; • Provide resume of new (chief) representative(s); • Provide photocopy of the ID card/Passport of new (chief) representative(s); • Provide a 2-inch sized photo of new (chief) representative(s); • Fill in Application Form of Amendment of the Representative Office of Foreign Enterprise; • Provide photocopies of Approval Certificate of establishing the representative office and Registration Certificate (the original Approval Certificate for Change shall be provided in case the Chief Representative has been changed); • Provide the dispatching letter issued by a foreign service provider in case the (chief) representative is […]

1. General Industry The application for registration of a Representative Office by a foreign company which engages in general business is straight forward. It normally involves a two step process. That is, first application to register with local Administrative Bureau for Industry and Commerce and then handle the post registration procedures. The detailed registration procedures for these Representative Offices are described in China Representative Office Registration and Maintenance Guide (7) – Registration Procedures. 2. Special Industries The applications for registration of a Representative Offices by those companies which engage in some industries, however, requires pre-approval from the relevant regulators in those industries. Authorities for approval are distributed among various State Council Departments and are delegated to their local offices. Applicants should apply for approval from different departments (at their local offices) according to their core activities. Some of the major types of industries and their approval authorities are: Industry Approval […]

1. China Representative Office Registration Procedures The procedures for establishing a Resident Permanent Representative Office (RO) vary slightly in different areas of China and also vary in accordance with the places where the foreign companies are located. In general, the procedures for the establishment of a Permanent Representative Office consist of three steps: Step 1: Pre-registration Before submitting the registration application documents to the local Administration for Industry and Commerce for registration, the foreign enterprise should have certain documents ready, including the tenancy agreement for the office premise to be used by the RO and the legalised identity documents and banker’s reference letter. Step 2: Registration The foreign investor submits the application documents to the relevant AIC to application for Representative Office Registration Certificate. This step is completed when the AIC issues a Registration Certificate for Permanent Representative Offices of Foreign Enterprises. Step 3: Post-establishment Registrations After a Permanent Representative […]