Viewpoints

1. Scope of Business of Representative Offices The business scope of a Permanent Representative Office (RO, also known as Resident Representative Office) should be clearly stated in the application document prepared by the applying foreign enterprise. After approval by the relevant authority and registration with the AIC, the business scope will be stated in the Registration Certificate of the Permanent Representative Office (RO). A Representative Office (RO) can only engage in business activities which are within the business scope as set forth in the Registration Certificate (business registration certificate). Normally, ROs can only engage in non-operational activities in China, such as liaison, product promotion, market research and technology exchange. However, if a bilateral treaty between China and the home country of the foreign enterprise provides that Permanent Representative Office (RO) established by enterprises of both countries should have the authority to engage in direct operational activities, such provisions should prevail. […]

1. Non-Legal Entity Permanent Representative Offices (ROs, also known as Resident Representative Offices) registered in China are non-legal entity and therefore not considered to be separate and independent from the foreign enterprises. Chinese laws do not expressly provide that ROs should bear liabilities independently with their own assets (i.e. limited liability), ROs may be deemed to be part of the foreign enterprise. As a part of the foreign enterprise, the foreign enterprises should bear liabilities of the Permanent Representative Office with all its assets. It the assets of the RO are not sufficient to satisfy its liabilities, the foreign parent enterprise should be responsible for the liabilities of the Permanent Representative Office. However, it is not clear as to the extent of liabilities to be borne by the foreign enterprise if a Permanent Representative Office exercises its authority which exceeds its business scope. Moreover , a Permanent Representative Office will […]

1. Nature of Representative Offices in China Representative Office (RO), also known as Permanent Representative Office or Resident Representative Office, is an office of a foreign enterprise that is set up in China to liaise with Chinese businesses and customers on behalf of the foreign enterprise (or head office). Establishment of a RO is subject to approval by the relevant authorities under Chinese law. Although ROs are not allowed to directly conduct business, there are still certain benefits that foreign enterprises can gain from setting up and legally registering a Representative Office. Perhaps the most important reason is that an RO can help its home company to generate income from sources inside China. Other possible benefits of setting up an RO include: ROs can function as a liaison between the home office and related industries in China; ROs can conduct market research and do preparatory work for their home company […]

On 20 October 2018, the Ministry of Finance and State Administration of Taxation of the People’s Republic China unveiled an “Interim Measures for Individual Income Tax Itemized Additional Deductions (Consultation Draft)” (thereafter the “Draft”) on special additional deductions from taxable personal incomes to collect public opinions. The interim measures are set to effect from 1 January 2019. China’s revised individual income tax law that came into force this month added itemized additional deductions from taxable incomes for children’s education, continuing education, treatment for serious diseases, caring for the elderly, as well as housing loan interests and rents. The interim measures set out the scope and standard of those deductions. In accordance with the Draft, a taxpayer is entitled to deduct the itemized additional deductions from their consolidated taxable income of the current year. Any deduction in excess of the taxable income cannot be carried forward to next tax year.   […]

1. Determination of Time on Which Labor Service Remunerations are Achieved In accordance with the document Cai Shui Zi No. 185 issued by the Ministry of Finance, the time on which labor service remunerations are achieved shall be the time on which taxpayers derive the labor service remuneration or the paying units pay remuneration.   2. The Concrete Policy-related Business Questions Concerning Tax Levied on the Incomes Gained from Artistic and Sports Performances Staged in China (Chinese Mainland) by Troupes or Individuals Coming from Abroad and from the Regions of Hong Kong, Macao and Taiwan In accordance with the stipulations of Guo Shui Fa [1994] No.106 issued by the State Administration of Taxation, for performers and athletes from abroad or from the regions of Hong Kong, Macao and Taiwan who stage artistic and sports performances in China (Chinese mainland) in personal name; tax shall be levied on the labor service […]

1. General Computation Methods of Tax Amount Payable In accordance with Article 6 of the Tax Law and Article 26, 27 and 28 of Regulations for the Implementation of the Individual Income Tax Law of the People¡¦s Republic of China, for income from wages and salaries, the balance of monthly income after deduction of RMB 800 in expenses is the taxable income. For those taxpayers who are not domiciled within Chinese, but receive wages and salaries from within China, and those taxpayers who are domiciled within China, but receive wages and salaries from outside of the Chinese borders, additional deductible expenses shall be RMB 3200. The term “the scope of applicability of such additional deductions for expenses” shall mean: (1) foreign nationals working in foreign investment enterprises and foreign enterprises in China, including overseas Chinese, compatriots of Hong Kong, Macao and Taiwan; (2) foreign experts hired to work in enterprises, […]

1. Determination of Income from Wage and Salary In accordance with the stipulations of the document Cai Shui Zi No.189 issued by the Ministry of Finance [1980], foreign personnel who comes to China to work shall be granted by dispatching units from foreign countries with expenses to be responsible for a task until it is completed, expenses cover salary, outlay for public purpose (expenses for the purpose of posts and communications, office expense, advertising expenses and entertainment expenses necessary for business contact) and living allowance (housing accommodation expense and travel expense), for the aforesaid expenses which can be divided clearly, individual income tax could be levied only on the part of the income from wage and salary according to relevant stipulations. In accordance with the stipulations of the document Cai Shui Zi No.021 issued by the Ministry of Finance and the State Administration of Taxation [1988], houses purchased or hired […]

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 […]