State Administration of Taxation Announcement on Reporting Overseas Investments and Income by Resident Enterprises (“the Announcement”) (国家税务总局关于居民企 业报告境外投资和所得信息有关问题的公告)
SAT released Announcement  No. 38 on June 30, which became effective September 1, 2014, obliging Chinese enterprise income tax (“EIT”) payers to report to the tax authority direct or indirect investment of at least 10% in foreign enterprises’ equity share, or any variation of the holding percentage above or below the 10% threshold. The report must be filed with the prepayment EIT declaration for the period in which the transaction occurred.
There are additional reporting obligations when the rule for controlled foreign companies (article 45 of the EIT Act) applies, even under the exception provided in article 84 of the Implementing Measures for Special Tax Payment Adjustments (for Trial Implementation) (circular Guo Shui Fa  No. 2). The taxpayer must submit the report when filing the annual EIT return, along with the foreign enterprise’s financial statements adapted to the Chinese principles.
The deadlines may be extended in special circumstances.
This Announcement aims to strengthen the supervision of outbound investments and tax liabilities in China that may result from them, and it is expected to affect the implementation of the Chinese controlled foreign company rules, which currently are barely applied in practice.
Date of issue: June 30, 2014. Date of effectiveness: September 1, 2014.