Register now for your free, tailored, daily legal newsfeed service.

Questions? Please contact [email protected]

Chinese Tax Regulation Update - November 2019

CMS, China

To view this article you need a PDF viewer such as Adobe Reader.

If you can't read this PDF, you can view its text here. Go back to the PDF .

China November 29 2019

Circular Number

Issuance Date

Effective Date

Topic

What is new?

State Administration of Taxation (“SAT”) Announcement [2019] No. 35

2019-10-14

2020-01-01

Administrative measures on non-PRC resident taxpayers applying for treaty benefits

This Announcement (“Announcement 35”) will replace the existing SAT Announcement [2015] No. 60 (“Announcement 60”) from 1 January 2020. Key changes brought by Announcement 35 are as follows:

1.	Submission of supportive documents no longer required upon tax declaration Under Announcement 60, a non-PRC resident taxpayer is required to make tax recordal with the tax authorities upon tax declaration by submitting two reporting forms and supportive documents. Under Announcement 35, the non-PRC resident taxpayer is only required to submit one reporting form (e.g. Information Reporting Form of Non-PRC Resident Taxpayer Applying for Treaty Benefits) instead of two upon tax declaration and submission of supportive documents upon tax declaration is no longer required. However, the non-PRC tax resident is still required to prepare and keep the supportive documents for follow-up administration of tax authorities. In other words, Announcement 35 postpones submission of supportive documents from the phase of tax declaration to the phase of follow-up administration.

2.	Reporting form simplified Compared with the reporting forms required under Announcement 60, the reporting form required under Announcement 35 is largely simplified. The new reporting form contains only basic information of the non-PRC tax resident (i.e. name, contact information, etc.) as well as statements made by the non-PRC resident taxpayer who shall undertake that:

	1)	The non-PRC resident taxpayer is the tax resident of the other contracting jurisdiction;

	2)	The principal purpose of the relevant arrangement and transaction is not to obtain treaty benefits;

	3)	It conducts self-assessment and takes due legal responsibilities;

	4)	The non-PRC resident taxpayer will collect and retain relevant documents for review in accordance with regulations and accepts the follow-up administration of the tax authorities.

	The simplified reporting form under Announcement 35 makes it difficult for the tax authorities to access the transaction details upon tax declaration. However, this may not necessarily reduce overall tax risk of the non-PRC tax resident, as the tax authorities are still empowered to get access to the transaction details through follow-up administration. Besides, as “pre-approval” from tax authorities will no longer be possible, the non-PRC tax resident taxpayer shall independently take relevant legal liabilities.

3.	Contents of supportive documents Announcement 35 clarifies the contents of supportive documents to be prepared and kept. Supportive documents should include:

	1)	Non-PRC resident taxpayer’s tax resident certificate issued by the tax authorities of the relevant foreign jurisdiction;

	2)	Other relevant identification certificate, where the non-PRC resident taxpayer applies for enjoying tax benefits under the international transportation clauses of the double taxation treaties or the benefits under the international transportation agreements;

	3)	Supportive documents including relevant contracts, agreements, board / shareholder resolutions, payment certificates, etc.;

	4)	Supportive documents to prove “beneficial status” of the non-PRC resident taxpayer, if the taxpayer applies for treaty benefits applicable to dividend, interest, and license incomes;

	5)	Other supportive documents which the taxpayer think are helpful.


	It is noteworthy that the requirement for supportive document in relation to “beneficial status” is clearly mentioned in Announcement 35, compared with Announcement 60.

4.	Clarification on respective legal liabilities of the non-PRC resident taxpayer and the withholding agent Compared with Announcement 60, Announcement 35 clarifies the respective legal liabilities of the non-PRC resident taxpayer and the withholding agent. Legal liabilities of the non-PRC resident taxpayer:

	1)	In the case of tax withholding, a non-PRC resident taxpayer is obliged to make self-assessment on its qualification for enjoying relevant treaty benefits, to fill out the reporting form according to actual situation and to submit the reporting form to the withholding agent in time.

	2)	If, due to its wrong judgment, a non-PRC resident taxpayer incorrectly enjoyed treaty benefits while it actually did not qualify for relevant conditions, leading to tax underpayment, the non-PRC resident taxpayer is obliged to voluntarily inform the tax authorities and make up the taxes underpaid.

	3)	If a non-PRC resident taxpayer incorrectly enjoyed treat benefits while it did not actually qualify for relevant conditions, leading to tax underpayment, the competent tax authorities are empowered to punish the non-PRC resident taxpayer for the late payment, unless the late payment was caused by the withholding agent that failed to declare and withhold taxes in time according to relevant clauses under Announcement 35.

	4)	The non-PRC resident taxpayer is obliged to collect and keep relevant supporting documents according to the PRC Law of Tax Collection and its implementation rules. The non-PRC resident taxpayer is obliged to submit the supporting documents once required by the tax authorities.


	Legal liabilities of the withholding agent:

	1)	In the case of tax withholding, the withholding agent is obliged to check the completeness of the reporting form filled out by the non-PRC resident taxpayer, to declare and to pay the withheld taxes to the tax authorities on behalf of the non-PRC resident taxpayer.

	2)	If the withholding agent fails to withhold and declare taxes according to relevant regulations or fails to submit relevant documents, resulting in the fact that the non-PRC resident taxpayer incorrectly enjoyed treaty benefit and underpaid taxes, the withholding agent should take the relevant legal responsibilities.

	3)	At the phase of follow-up administration, under certain circumstances, the withholding agent may be required by the tax authorities to submit relevant documents within a time limit to assist the tax investigation.


5.	Revised definition of non-PRC resident taxpayer Announcement 35 has revised the definition of “non-PRC resident taxpayer”. According to Announcement 35, “non-PRC resident taxpayer” refers to:

	1)	the taxpayer who is the tax resident of the other contracting state only; or

	2)	the taxpayer who, on the one hand, is the tax resident of both the other contracting state and the PRC according to the PRC domestic tax law, but on the other hand, is finally determined as the tax resident of the other contracting state only according to the tie-break rules of the relevant bilateral double taxation treaty / agreement.

SAT Announcement [2019] No. 36

2019-10-26

2020-01-01

Deemed taxation method applicable to retail export in Cross-border E-commerce Comprehensive Pilot Zone (“Comprehensive Pilot Zone”) for Corporate Income Tax (“CIT”) purposes

Cross-border e-commerce is rapidly growing in China. It is usually the case that a company engaged in cross-border e-commerce finds it difficult to get a purchase invoice for the goods for export. To further encourage the development of this industry, a circular Caishui [2018] No. 103 (“Circular 103”) was released in September 2018. According to Circular 103, for e-commerce retail export companies established in the Comprehensive Pilot Zone meeting certain conditions (“Qualified Companies”), export of goods purchased without valid purchase vouchers can be exempt from VAT and Consumption Tax (“CT”). This Announcement was released to further clarify that the deemed taxation method is applicable to the Qualified Companies for CIT purposes. According to this Announcement, the Qualified Companies should accurately book their revenues. The taxable income of a Qualified Company should be determined based on its actual revenue multiplied by a deemed profit rate of 4% (i.e. the minimum deemed profit rate applicable to wholesale and retail industry under the circular Guoshuifa [2008] No. 30). Qualified Companies meeting relevant conditions under the circular Caishui [2019] No. 13 are entitled to the preferential CIT treatment applicable to small-scale and micro-scale enterprises. CIT-exempted incomes derived by the Qualified Companies, as stipulated under the PRC CIT Law, can be exempt from CIT.

SAT Announcement [2019] No. 38

2019-11-14

2020-02-01

Administration of anomalous VAT credit vouchers

The Announcement was released to improve the current taxation environment.


1.	The following special VAT invoices shall be treated as anomalous VAT credit vouchers (“Anomalous Vouchers”):

	1)	Special VAT invoices which are not yet issued or already issued from the lost or stolen Golden Tax device but not yet uploaded;

	2)	Special VAT invoices of an anomalous VAT payer who does not declare to tax authorities or fully pay the taxes of the underlying special VAT invoices according to the relevant regulations;

	3)	Special VAT invoices that are marked as “inconsistent”, “incomplete” or “cancelled” by VAT invoice management system;

	4)	Special VAT invoices that are suspected to be falsely issued or issued by a taxpayer who fails to pay the relevant CT, upon big data analysis performed by the SAT or the provincial tax authorities;

	5)	Special VAT invoices that fall under the scope of Section 2 Item 1 of SAT Announcement [2016] No. 76;

	6)	Special VAT invoices, which meet both conditions below:

		•	The amount shown on the invoice takes up no less than 70% of the total input VAT of the special VAT invoices of the period.

		•	The amount shown on the invoice exceeds RMB 50,000.


2.	The following treatment should be adopted if the Special VAT invoices obtained by a general VAT payer is identified as Anomalous Vouchers:

	1)	Anomalous Vouchers, for which VAT credit has not yet been claimed, are not allowed to be used for credit. If the input VAT of Anomalous Vouchers is already claimed for credit, the relevant VAT amount should be transferred out to be non-creditable.

	2)	Anomalous Vouchers, for which export VAT refund has not yet been claimed or has already been claimed but the relevant VAT is not yet actually refunded, refund of the relevant VAT is not allowed. In the event that the input VAT of Anomalous Vouchers is already claimed for export VAT refund and the relevant VAT is already refunded, if the taxpayer is subject to Exempt-Credit-Refund method, the amount shown on the Anomalous Voucher should be transferred out to be non-creditable. If the taxpayer is subject to Exempt-Refund method, the refunded VAT amount should returned.

	3)	If a CT payer producing taxable products based on the taxable materials purchased or acquired via consignment processing has not claimed CT credit for the materials, the relevant CT paid cannot be credited. If the taxpayer has already claimed CT credit for the materials, the claimed amount should offset against the creditable CT of the current period and any claimed amount exceeding the creditable CT amount should be made up.

	4)	Taxpayers classified as Level A, which has already used Anomalous Vouchers for VAT credit, for export VAT refund or CT credit purposes, can apply with the competent tax authorities for assessment within 10 days upon receiving notification from the tax authorities. Upon assessment, if the tax authorities confirm that relevant conditions for input VAT credit, export VAT refund, CT credit are met, the taxpayer can be exempt from the treatment under Section 2 1) 2) 3). If the taxpayer fails to apply for assessment within the stated period, treatment under Section 2 1) 2) 3) shall apply.

	5)	All taxpayers have the right to apply with the competent tax authorities for assessment, if the taxpayers have questions against the tax authorities’ identification of Anomalous Vouchers.


3.	Taxpayers identified by the SAT or the provincial tax authorities through big data analysis as “running tax risks” shall not issue VAT invoices offline. The person issuing VAT invoices should complete real name verification, when using the software to issue VAT invoices.

4.	A taxpayer newly registered as a general VAT taxpayer is generally not allowed to issue VAT invoices offline within the first 3 months from the date on which the company issues its first VAT invoice.

CMS, China - Gilbert Shen

Save & file
View original
Forward
Share
Follow
Please login to follow content.
Like
Instruct

Filed under

Tagged with

Big data

Register now for your free, tailored, daily legal newsfeed service.

Chinese Tax Regulation Update - November 2019

Filed under

Tagged with

Popular articles from this firm

PRC Law on Prevention and Control of Soil Contamination — One Year after Implementation *

Overview on the Interim Provisions on the Review of Concentrations of Undertakings *

A New Announcement on the Local Production of Imported Medical Devices in China *

China releases its revised Negative List for Market Access 2020 and Catalogue of Industries for Encouraging Foreign Investment 2020 *

Change of Penalties under new PRC Criminal Law *

Related topic hubs

Related China articles

Chinese Tax Regulation Update - November 2017 *

Chinese Tax Regulation Update November 2018 *

Chinese Tax Regulation Update - June 2017 *

Related international articles

Africa tax in brief - 19 NOV 2019 * - South Africa

Asia Tax Bulletin Spring 2016 * - Asia-Pacific

Tax decree and circular guiding the implementation of the new Tax Law effective from 1 January 2015 * - Vietnam