Date Topic What is new?
SAT Announcement  No. 9 2014-1-29 2014-1-29 Procedural issues regarding application of the PRC-tax-resident-enterprise status of foreign companies controlled by Chinese enterprises or enterprise groups
Back in 2009, the SAT issued the tax circular Guoshuifa  No. 82regarding criteria and procedures for foreign companies (with their controlling investors being Chinese companies or company groups) to be recognised as PRC-tax-resident-enterprises (“TREs”) due to their PRC located effective management. TheAnnouncement made procedural adjustments and clarified some tax issues:
The TRE status application shall be reviewed by the in-charge tax authority and decided by the provincial level tax authority. In the past, the case had to be reported to the State Administration of Taxation (“SAT”) level by level for decision.
Further, if a foreign company is recognised by a provincial level tax authority to be a TRE, it shall inform other provincial tax authorities where the foreign company has subsidiaries. The decision will also be published at the website of the SAT.
The new regulation clarifies that the tax authority in charge of TRE status application shall be the one where the main shareholder of the foreign company is located. In the past, the tax authority where the effective management is located could also be in charge of the application.
Under PRC tax law, dividends between TREs are generally exempted from corporate income tax (“CIT”). The new regulation claries that such CIT exemption applies to dividends distributed within the year of TRE status recognition, even though the dividends may be paid out of profits of proceeding years.
The new regulation streamlines the procedures and clarifies the CIT exemption issue of dividends paid out of profits of previous years. Overseas companies with a PRC controlling shareholder and a PRC located effective management are advised to pay close attention to this new regulation.
SAT Announcement  No.11 2014-02-08
New Administration Measures on VAT refund for exportation of certain services
Under the PRC VAT/BT reform, certain services are subject to VAT at 0%. These services mainly include international transportation services, transportation services provided in Hong Kong, Macau and Taiwan, as well as R&D and design servicesprovided to overseas entities. For such services, VAT refund applies in order to enable tax payers who provide the services to recover the relevant input VAT.
The new Measures were issued on 8 February 2014 to replace the old ones issued in 2013. The old regulation provided detailed procedural and documental requirements regarding VAT refund for these services. The new Measuresmade the following main amendments to the old version:
International railway and airline transportation services, as well as time charter and wet lease for international transportation purposes are newly covered.
Detailed document requirements have been provided for exportation of R&D and design services exported by a trading company (including such services performed by the trading company itself and its subcontractors).
The new Measures took effect retrospectively from 1 January 2014. Companies engaged in provision of the relevant services are advised to pay close attention to the new requirements.
SAT Announcement  No. 10 2014-02-13 2014-02-13 List of tax issues subject to administrative examination and approval On 13 February 2013, the SAT issued a comprehensive list of tax issues that are subject to administrative examination and approval (“行政审批＂).The list includes 87 items with the relevant legal basis being cited, e.g. general VAT payer status verification and double taxation treaty benefit.
The publication of the list shows an attempt of the SAT to make tax related administrative examination and approval more transparent. The SAT stressed that, without proper legal basis, tax authorities are not allowed to require administrative examination and approval for items that are not in the list.
SAT Announcement  No. 14 and No. 15 2014-03-03
2014-03-06 Lists of tax issues where the tax authority shall avoid making an on-site investigation
In order to avoid approaching tax payers too often, the SAT issued two batches of lists of tax issues where an on-site investigation shall be avoided by the tax authorities.
Among other issues, the following items are included in the lists:
Assessment of double taxation treaty treatment claimed by a non-resident tax payers;
Indirect share transfer made by a non-resident tax payer;
Follow-up administration of special tax adjustments (e.g. transfer pricing adjustments);
Failure to apply for the general VAT payer status within the time period requested by law.