The State Administration of Taxation ("SAT") has recently promulgated the Announcement on Issues concerning the Reporting of the Information relating to Investment and Income outside China by Resident Enterprises (the "Announcement"), with effect as of September 1, 2014.
The Announcement specifies that, where a resident enterprise establishes a foreign enterprise, becomes a shareholder of a foreign enterprise, disposes of a foreign enterprise's shares held by it, or its voting shares in a foreign enterprise reach a certain percentage, the enterprise is required to report the information and related data concerning the foreign enterprise of which it is a shareholder. Meanwhile, when a tax authority conducts a tax inspection, the tax authority may require a resident enterprise to report the necessary information in relation to its income gained outside China. Where a resident enterprise fails to report as required, the tax authority shall order it to make corrections within a time limit, and if no corrections have been made, the tax authority may assess the payable tax as prescribed. In addition, where a non-resident enterprise establishes an organization or premises within the territory of China and obtains income which is gained outside China but has actual connections with the said organization or premises established by it, the enterprise shall report the related information with reference to the provisions of the Announcement.