Tax Administration for Non-Tax Resident Enterprises in China
April 23, 2009
China Administration of Taxation recently promulgated a Circular (Guoshuifa 2009 No 3) (“hereinafter referred to as “The Circular”) to strengthen the control of Non-TRE Income Tax Resourcing Deduction. The below mentioned enterprises shall be regarded as Chinese Tax Resident Enterprise (TRE):
a. An enterprise which is established and registered in China, or
b. An enterprise which has in actual fact a management institution in China.
Correspondingly, Article 2 of the Circular indicates that so called Non-TRE which shall be set up in accordance with the law of the foreign country (region) whose actual administration institution is outside China; could have incomes originating from China without setting up institutions or establishments in China or they have already set up institutions or establishments in China but the income is not effectively connected with the institutions or establishments that were set up in China.
If a non-tax resident enterprise (”Non-TRE”) derives passive income, interest, dividend, rental, royalties and capital gains, etcetera from China, the payer of the income in China, a so-called Withholding Agent, is obligated to withhold and settle the withholding income tax (”WHT”), if any, on the passive income to the Chinese tax authorities at the time when the payment of the passive income is made or due.
Aforementioned income shall be divided into two categories. The first category is service income, since there is some specialty while determining tax liability considering the limit in respect of the length of time by the contact, shall be regarded as one category; besides, the income listed above shall fall into the second category of income. The tax treatment against these two categories of incomes is different. For service income, the tax bureau will ratify relevant margin align with the industry to which the service belong. For the second category of income, the taxation rate is normally ten percent.
The Circular sets out the detailed requirements for the Withholding Agents in relation to the WHT withholding obligations. It is generally considered that Circular 3 provides more strict collection measures than previous regulations. It will have significant impact on both non-TRE taxpayers and the Chinese Withholding Agents.
Source: By Teresa Zhang
http://www.crowehorwathinternational.com
Tags: Enterprise, tax, taxationRelated Posts:
China imports record volume of iron ore in March
April 17, 2009
April 14 (Xinhua) — China’s steel industry overestimated the country’s demand for iron ore and as a result imported a record high amount of the material in March.
A surge of domestic steel output and price increases in the beginning of 2009 raised market expectations. Many domestic steel mills and traders increased orders for iron ore in February and March as they anticipated demand would continue growing, said Liang Shuhe, deputy-director with the Foreign Trade Department of the Ministry of Commerce (MOC), at an industry conference in the port city of Tianjin Monday.
China’s iron ore imports topped 52.08 million tonnes in March, setting a monthly record high. It beat the last record which was just set in February. That’s when the country imported 46.74 million tonnes of iron ore.
In the first quarter, China imported a total of 130 million tonnes of iron ore. In 2008, iron ore imports totaled 440 million tonnes.
“The imports in March mostly came from orders made in February. Iron ore was priced at 80 U.S. dollars a tonne then, but dwindled to 60 U.S. dollars a tonne now. It means huge unrealized losses for steel mills and traders who betted on price hikes,” said Du Wei, an analyst on iron ore with Umetal.com.
Those unrealized losses for the 52.08 million tonnes of iron ore imported in March could be about 1 billion U.S. dollars, Du said.
Liang said iron ore prices were hinged to steel prices.
“Domestic steel prices have dropped and will further dwindle. Thus it’s inevitable for iron ore prices to go down,” Liang said.
Iron ore stockpiled at ports stood at 70 million tonnes in March, nearing a historic high, according to anonymous sources within the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters.
Due to declining iron ore prices, an increasing number of domestic iron ore mines are closing down, said Zhang Ye, deputy-general-manager of China National Minerals Co., Ltd.. No specific figures were available.
“About 90 percent of China’s iron ore mines are suffering from losses,” Du said. “Steel is a kind of product that could be recycled and thus its scarcity could not be exacerbated in the long term.”
Tags: prices, industry, iron oreRelated Posts:
China’s FDI norms look set to be tweaked
April 16, 2009
April 16 — China will further streamline approval procedures for foreign direct investment (FDI) and channel more FDI into the underdeveloped western and central parts of the country, an official from the Ministry of Commerce (MOFCOM) said on Wednesday.
The move is part of the government’s efforts to boost FDI inflow, which has been affected by the global financial crisis. China had authorized its provinces to approve FDI proposals worth up to $100 million last month.
MOFCOM spokesperson Yao Jian said the country would ensure a more convenient environment for examination and approval of FDI proposals and launch policies to spur foreign investment flow into China’s central and western regions.
“FDI is of great significance in creating jobs and stimulating the economy,” Yao said.
The ministry will also encourage investment in sectors such as hi-tech, services and environment protection, facilitate the establishment of more provincial-level economic and technological development areas, as well as mergers and acquisitions activity under the Chinese anti-monopoly law, Yao said.
MOFCOM statistics revealed that the value of FDI in March fell by 9.5 percent year-on-year, the sixth monthly drop in a row. FDI touched $8.4 billion in March, the largest ever in the past six months, but the monthly decline rate was far lower than that of the previous months; it had dropped by 32.7 percent in January and 15.8 percent in February.
In 2008, foreign investors in China, who accounted for 3 percent of the nation’s total by number, contributed 30 percent to industrial output, 55 percent to its imports and exports, and created 11 percent of urban jobs.
In the first quarter, FDI in manufacturing and services dropped by 11.5 and 31.3 percent, among which, the real estate sector saw the biggest drop, of 38.3 percent.
Customs data also showed that in March, China’s foreign trade decreased by double digits from a year earlier, the fifth monthly drop since last November.
But a positive indicator was that the contractions were getting smaller. Exports in March decreased by 17.1 percent, 0.4 and 8.6 percentage points lower than that of January and February. Moreover, exports of labor-intensive products including garments, bags, shoes and furniture were growing.
Experts have said China’s foreign trade and FDI would witness mild growth in the last quarter of this year.
“The ease-off is encouraging, but the prospects are still tough and we cannot lower vigilance,” Yao said.
With regard to foreign trade, Yao said the government would assist small and medium-sized enterprises in developing their overseas markets; offer them help in marketing, registration and branding; urge financial institutions to grant loans to the large-scale equipment providers for exports, and encourage the imports of products related to hi-tech and environment protection and primary products.
(Source: China Daily)
Tags: Trade, exports, global financial crisisRelated Posts:
Yuan seen to remain stable in long term
April 14, 2009
THE yuan may appreciate against the United States dollar over the short term but is more likely to remain stable in the long run, analysts said.
The Chinese currency dipped slightly against the greenback last week and ended at 6.8347 last Friday, according to the China Foreign Exchange Trade System. The yuan closed at 6.8320 by the end of the previous week.
The State Council, China’s Cabinet, last Wednesday picked Shanghai and four other cities in Guangdong Province to take part in a trial to settle overseas trade in the yuan rather than US dollars in a move to stabilize the trade and to build up the yuan’s position in the international monetary system.
“The trial settlement in yuan would favor the local currency and boost its appreciation in the short and middle terms,” according to a research note by Standard Charted.
Deng Xianhong, deputy head of the State Foreign Exchange Administration, last Friday said China “will move on with the trial of using yuan in overseas trade settlement and relax the cross-border financing restrictions to shore up support from foreign exchange to the economy.”
China’s exports last month fell by a slower pace of 17.1 percent from a year earlier to US$90.29 billion, the General Administration of Customs said last Friday.
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Setup, Extension, Alteration and Termination of Permanent Representative Bodies of Foreign Countries
April 11, 2009
A.Acceptance and Hearing
Qualifications:
Applicant shall submit the following materials:
1.Setup:
（1）Application signed by the Chairman of the Board or General Manager containing items of: basic information of the enterprise, purpose for setting up the Permanent Representative Body, Name of the body, Personnel appointed (Chief Representative and Representative), business scope, term of residence, Office address and so on.
（2）Practice Legality Certificate issued by the appropriate authority of the state that the enterprise locates in (duplicate);
（3）Credit Standing Certificate (original)issued by the bank having business connections with the enterprise;
（4）Power of Authority for the Chief Representative and Representative signed by Chairman of the Board or the General Manager of the enterprise; Resumes of the Chief Representative and Representative and their ID card copies. In case that the Chairman of the Board acts as the Chief Representative and Representative, the Power of Authority must be signed by at least 2 directors of the enterprise. For Enterprise with no board of directors, the Executive Director may sign the documents concerned.
（5）Lease Contract for the Office Site signed by person in charge or person authorized, as well as certificate concerning foreign affairs issued by Police
（6）Fill in Application form for setting up Permanent Representative Body of Foreign Enterprise;
（7）Other materials for application considered necessary by examination authority.
Pursuant to Article 12 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise
2. Extension
（1） Application for Extension signed by Chairman of Board or General Manager;
（2） Report of Business activity of this representative body during the last term of residence;
（3）Credit Standing Certificate (original) issued by the bank having business connections with the enterprise;
（4）Practice Legality Certificate issued by the appropriate authority of the state that the enterprise locates in( duplicate);
（5）Approval Certificate of the Permanent Representative Body and its register card copies;
（6）Lease Contract or Access Certificate of the Office Site signed by person in charge or person authorized of the enterprise.
（7）Fill in Application Form for Extending Permanent Representative Body of Foreign Enterprise.
(Pursuant to Article 17 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3、Alteration
Any foreign, or Hong Kong and Macao enterprise that asks for alteration on the name of the Permanent Representative Body, changing or adding Chief Representative and Representative, alteration on the business scope, term of residence and office site of the Body, shall submit application signed by the Chairman of the Board or the General Manager and other materials related the alterations (the application for altering the office location may be signed by Chief Representative) , as well as fill in the Application Form for Alterations of Permanent Representative Body of Foreign Enterprise.
(Pursuant to Article 19 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
4、Termination
Upon the expiration of the term of residence or terminating business ahead of the term , the Permanent Representative Body of foreign or Hong Kong and Macao enterprises shall apply for cancellation of the permanent body . To fulfill this, the Chairman of the Board of Directors or the General Manager shall make signature on the Cancellation Application and the Original Approval Certificate, and submit them to the original approval departments for records through the original undertaking unit.
Criterion:
1.Application Materials shall be complete , standard and valid.
2.Application forms for Setup, Extension, Alteration and Termination of Permanent Representative Bodies of foreign, Hong Kong or Macao Enterprises as well as the Power of Authority for the Chief Representative and Representative shall be written in Chinese and if they are committed in other languages, the a Chinese version shall be attached. Other materials written in other languages shall also be attached by Chinese version. (Pursuant to Article 21 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3.If necessary, the examination and approval authorities are empowered to request all of part of the application materials for the setting up of Permanent Representative Body submitted by Foreign Enterprise be notarized by the Notarization Authorities of the state concerned, meanwhile be authenticated by Chinese Embassy in that country. (Pursuant to Article 22 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
Person responsible for this post: the acceptance and hearing personnel of Foreign Enterprise Representative Office of the Foreign Trade Administration Department.
Duty and Power:
Examine and Check the application materials in accordance with the criterion for acceptance and hearing;
Accept and hear the case if the materials submitted is qualified; and transfer the materials to the examiner.
Unqualified materials will not be accepted, whereas inform applicant all materials needing further supplement and amending at one time. Meanwhile apply to the higher-up for records.
Time Limit: 1 working day
B. Examination
Criterion:
1.Application Materials shall be complete, standard and valid.
2.Applicant must be Trader, manufacturer, freight agent, contractor, consulting company, advertisement company, investment company, leasing company and other economic and trade organization (Pursuant to Article 2 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3、The enterprise shall get legal register in home country(Pursuant to Article 8 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
4、Must have a good will (Pursuant to Article 8 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
5、Name of the Permanent Representative Body of foreign or Hong Kong and Macao enterprise shall be in the style of Country Name + Enterprise Name + City Name + Representative Office(Pursuant to Article 13 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
6、The maximum term of approval for once for the Permanent Representative Body of foreign or Hong Kong and Macao enterprise is 3 years .Term of Residence begins from the date of the issuance of the approval certificate by the authority. If the term needs extending upon the expiration, the foreign enterprise shall make application 60 days in advance to the original approval authority by means of the formal undertaking unit, and deal with the formality of extension. (Pursuant to Article 16 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
7、When applying for setting up the Permanent Representative Body , foreign or Hong Kong and Macao enterprise must entrust one company vested with foreign trade dealership by the approval of department of Chinese government in charge , or an organization dealing in foreign economic and trade or Foreign affairs service unit approved by MOFTEC as the undertaker to hand in all sorts of materials to the examination and approval authorities and deal with the application formalities. (Pursuant to Article 10 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
8、Examination and Approval authority dealing with the setting up of Foreign Chamber of Commerce in China is Ministry of Foreign Trade and Economic Cooperation and the register authority is Civil Administration Department. One country can only establish one chamber of Commerce in Beijing at present, and no chamber of Commerce or subsidiary chamber is allowed in other cities. (pursuant to Summery Notice of the Work Meeting on Examination and Approval for National Foreign Merchants’ Permanent Representative Bodies and Import Machinery and Electrical Products Maintaining Station, MOFTEC Official Release 1997,NO.1962 )
9、Chief Representative and Representative of Permanent Body of foreign or Hong Kong and Macao enterprises must be qualified in the following aspects:
（1）Foreign residence holding legal common passport( excluding overseas student in China)
（2）Chinese citizen obtaining permanent residence at abroad
（3）HK and Taiwan fellowmen holding valid certificates( Taiwan passport invalid);
（4）If employing Chinese citizen to act as the Chief Representative and Representative(excluding the NO.2 case of the above), foreign enterprise shall entrust the local foreign affairs service unit or other units appointed by Chinese government to handle the application formalities according to related laws and regulations of China (shall present the delegation letter issued by the empowered unit).
(Pursuant to Article 29 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
10、Enterprises of Taiwan, Semi-Official and Non-Diplomatic Countries whose name contains the words like “Study abroad” “Education” “Immigration” will not be allowed to establish permanent representative bodies at present. Permanent representative bodies of Consulting company, Management company, counseling company shall note clearly in their business scope that “ will not engage in the contacting activity of overseas study and immigration” (Pursuant to Notice of Problems concerned with Examination, approval and management of Foreign Permanent Representative Body, MOFTEC Official Release 1999, NO.1802)
11. Chinese enterprises overseas that was established less than 1 year ago shall not be approved to establish permanent representative body in China; Overseas enterprises of non-productive type are generally not allowed to establish permanent representative body back in China; Enterprises running in deficit are not allowed to set up permanent representative body; Chinese Enterprises overseas in the name of the Parent Company, Subsidiary company intending to set up representative office will not be allowed in principle. (Pursuant to Notice of Rules in Understanding some Problems concerned with Examination and approval of Foreign Permanent Representative Body, MOFTEC Official Release 1993, NO.1794).
12、When applying to set up permanent representative bodies, Foreign enterprises engaged in the industries of Finance and Insurance shall apply to the Peoples’ Bank of China for approval; Enterprises in marine, marine agency shall apply to the Ministry of Communication of China for approval; enterprises in aviation transportation shall apply to General Bureau of Civil Aviation of China for approval; enterprises of other industries shall apply to the Commissions, Departments or Bureaus of Chinese government in charge for approval. For example, Law firms shall apply to Ministry Judiciary for approval and Accounting Firms shall apply to Ministry of Finance for approval. ( pursuant to Provisional Regulations on Management of Permanent Representative Bodies of Foreign Enterprises ,State Council of China)
13、Chief Representative and Representative cannot act as Chairman of the Board, General Manager or Manager and other positions in domestic foreign invested enterprises.(Pursuant to Summary Notice of the Work Meeting on Examination and Approval for National Foreign Merchants’ Permanent Representative Bodies and Import Machinery and Electrical Products Maintaining Station, MOFTEC Official Release 1997,NO.1962).
Person responsible for this post: Examination personnel in Foreign Trade Administration Department
Duty and Power:
Examine and Check the application materials in accordance with the examination criterion;
If the materials submitted are qualified, put forward the approval comment, fill in the examination form, then return materials and the comment to the reviewer;
If materials are unqualified, put forward the disagreement comment, then return it to applicant.
Time Limit: 4 working days
D. Review
Criterion: Same as the examination criterion.
Responsible person for this post: Vice director of Foreign Trade Administration Department in charge
Duty and Power:
Review the examination comment according to the criterion.
If agree to the examination comment, sign the reviewer’s comment in the Examination form and issue the Certificate.(If submit to MOFTEC, must transfer to Director of the Department in charge for approval.)
If disagree to the examination comment, exchange ideas with examiner, then put forward review comment and reasons, transfer them together with that of the examiner to the approval personnel.
Time Limit: 1 working day
D. Approval
Criterion: Same as the review criterion.
Responsible person for this post: Commission Leader in charge
Duty and Power:
Make approval in a fixed time to the collected examination comment according to the Criterion.
If agree to the review comment, put forward comment in the approval form then transfer it to the acceptance personnel.
If disagree to the review comment, exchange ideas with reviewer, put forward the approval comment and reasons in the approval form, then return it to the acceptance personnel by way of the original means.
Time limit: 1 working day
E. Print and Proof
Criteria
1.Submitted Documents shall be signed by the issuing leader, has clear classification and legible writing;
2.Material to be printed shall be in consistency with original document and has no omissions, mistakes and accretions;
Responsible person for this post: Printing personnel and examination personnel of this department
Work Criterion
1、Put the Approval Certificates for Foreign Representative Body in Beijing complete, accurate and valid;
2、Proof shall be correct and has no errors.
Duty and Power
For the approved materials, Print the Approval Certificate for Foreign Representative Body in Beijing in triplicate as provided, and notify the proof personnel to make proof.
Time Limit: 1 working day
F. Notification
Person responsible for this post: acceptance and hearing personnel in Foreign Trade Administration Department
Criteria:
1.Notify the applicant the result of the matter handled timely and accurately;
2.Make the certificate complete, accurate and valid;
3.Keep the examination documents complete and standard for file.
Duty and Power:
Make notification and issue approval documents and keep them on file according to the above criteria;
With respect to the approved application, issue documents concerned and notify the applicant to receive it; announce the result by way of the Internet if the management through Internet is necessary.
With respect to the denied application, make all materials needing further supplement and amending, the requirement, and related rights of applicants and means of making complaint altogether known to applicants in written form at one time. Meanwhile return the application documents to the applicant.
In terms of the unapproved cases, make the reasons, requirement and related rights of applicants, as well as the means to make complaint known to the applicant, and return the application materials to applicant.
Time Limit: 1 working day
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