Circular Number Issuance Date Effective Date Topic What is new? SAT Announcement  No. 24 2017-06- 19 2017-01- 01 Implementation of preferential tax treatment of Corporate Income Tax (“CIT”) for High New Technology Enterprises (“HNTEs”) The Announcement is released in accordance with earlier circulars regarding new accreditation requirements for HNTE (i.e., Guo Ke Fa Huo  No.32 and Guo Ke Fa Huo  No. 195). The Announcement mainly focuses on some implementation matters regarding the preferential tax treatment granted to HNTEs. Details are as follows: A qualified HNTE shall pay quarterly CIT based on the rate of 15% before the HNTE certificate is renewed during the year in which the old HNTE certificate expires. If the entity fails to obtain the renewed HNTE certificate by end of that year, any underpaid CIT should be made up for that year. If an HNTE is found to no longer satisfy the HNTE requirements by the tax authority through its daily administration, the tax authority should ask the HNTE recognition committee to review and re-assess the HNTE status. If it turns out that the entity is indeed no longer qualified as HNTE, the HNTE recognition committee should revoke the entity’s HNTE certificate and inform the in-charge tax authority to request the entity to make up any CIT underpaid from the period when the entity began to disqualify for the HNTE status. Starting from 2017, HNTEs should keep necessary supporting documents as listed in SAT Announcement  No. 76 when they perform HNTE recordal with the tax authorities for annual CIT declaration purpose. Caishui  No. 56 2017-06- 30 2018-01- 01 VAT on asset management products A previous circular Caishui  No. 140 stipulates that managers of asset management products (“asset managers”) shall be the VAT taxpayers for taxable activities carried out during the operation of asset management products, effective from 1 July 2017. This Circular 56 was further released to clarify the VAT treatment for asset management products and asset managers with the effective date postponed to 1 January 2018. According to the Circular, VAT taxable activities carried out by the asset managers during the operation of asset management products shall be subject to 3% VAT under the simplified calculation method. It is noteworthy that the simplified calculation method will only apply to taxable activities relating to the operation of asset management products. Therefore, it is necessary to segment revenue and VAT payable between “operation of asset management products” and other business provided by the asset managers (such as the asset management services provided by the managers which is subject to 6% VAT under the general calculation method). If such segmentation is not possible, the simplified calculation method will not be applicable. Caishui  No.58 2017-07- 11 2017-07- 01 Clarification of several VAT matters due to VAT reform As a continued move to implement VAT on construction services and other services, the Circular is released as a revision and a supplementary document to the previous circular Caishui  No.36 as well as other existing VAT regulations. The main contents of this Circular are as follows: VAT pre-payment obligation (rather than the formal and final VAT obligation) shall be triggered when the construction service provider receives the advanced payment. VAT to be pre-paid shall be calculated based on the advanced payment received from which the sub-contracted amount can be deducted. A VAT prepayment rate at 2% shall apply if the general calculation method is adopted, while a VAT pre-payment rate at 3% shall apply if the simplified calculation method is adopted. The Circular also clarifies the stipulations regarding VAT exemption of other miscellaneous VAT taxable services such as discount and rediscount services provided by financial institutions, activities of circulating subcontracted land to agricultural producers for agricultural production purpose.