In an effort to implement and carry out regulations encouraging and regulating overseas investment by China-based enterprises and leverage the functional role of taxation, China’s tax authorities are increasing public awareness of the importance of tax and management services related to overseas investment by China-based enterprises. The end goal is to optimize services, improve policies, regulate management and strengthen cooperation, reinforce organization and leadership, better specify functions, take more practical measures and improve performance of the relevant services.
I. Providing Effective Tax Services for Overseas Investment by China-Based Enterprises
(1) Tax authorities are formulating uniform tax service guidelines for overseas investment by China-based enterprises. These guidelines will play an important guiding role in encouraging and regulating overseas investment in the areas of interpreting tax treaties signed between the Chinese government and foreign countries; current China tax policies and provisions regarding overseas investment and labor services; tax systems; and foreign tax collection laws. The guidelines will include countermeasures for taxrelated disputes that occur when China-based enterprises make overseas investments and render labor services abroad; deductions on taxable overseas income; overseas tax reduction and exemption measures; and measures for making up overseas business losses. The State Administration of Taxation will be responsible for formulating uniform guidelines; all regions may formulate service guidelines pertinent to their region based on these guidelines.
(2) Tax authorities are also streamlining tax information and consultancy channels regarding overseas investment by China-based enterprises. The State Administration of Taxation now features a regular column on its website publicizing its guidelines, and all state and local tax administrators at the provincial level will include corresponding information and question-and-answer columns on their websites. These efforts are designed to keep China-based enterprises informed and current on tax laws, regulations, and tax collection measures, as well as providing tax guidance on overseas investment. A region with many China-based overseas investment enterprises may open a special consultancy center to provide fast, convenient and professional services for these enterprises.
(3) Tax education for China-based overseas investment enterprises is being improved. Tax authorities at all levels will hold various educational
programs and special training sessions and policy consultation conferences to answer tax questions concerning these enterprises. Officials in relevant agencies will regularly visit these enterprises and address any tax problems arising in the process of making overseas investments.
II. Implementing and Perfecting Tax Policies for Overseas Investment by China-Based Enterprises
(1) Plans are also in place to strengthen implementation of tax policy for overseas investment by China-based enterprises. All regions will, according to the Income Tax Law on Foreigninvested Enterprises and Foreign Enterprises, the Interim Regulation on the Enterprise Income Tax, and tax treaties and relevant income tax provisions in foreign countries:
- Review implementation of relevant tax policy in this area;
- Seriously implement policies for calculating overseas income, loss recovery, taxable income calculation, deduction of overseas taxes, reducing and exempting overseas tax, etc.;
- Solve the problems of nonfulfillment and ineffective fulfillment; and
- Implement timely export tax refunds in all regions, according to current provisions, on goods procured by China-based overseas investment enterprises and shipped abroad for investment.
(2) Investigation and research are being strengthened and relevant tax policies improved. All regions will increase implementation investigation and research efforts for current tax policies for overseas investment including the business climate for overseas investment. They will also review any problems encountered in their implementation, why the problems occurred, solicit opinions and suggestions for solutions, and make timely reports to the State Administration of Taxation.
III. Regulation and Reinforcement of Tax Collection on Overseas Investments by China- Based Enterprises
(1) Operational rules will be formed for tax collection on overseas income of China-based enterprises.
(2) Permanent household management will be regulated and reinforced.
(3) Declaration of overseas income will be regulated and reinforced.
(4) Tax inspection of overseas income will be regulated and reinforced.
IV. Strengthening Coordination and Cooperation with All Relevant Departments
(1) Internal cooperation with taxation authorities will be strengthened.
(2) Cooperation with relevant governmental departments will be strengthened.
(3) International tax cooperation will be strengthened.
Each region will report its implementation of the current Notice to the State Administration of Taxation (International Taxation Department) before the end of October 2007.