Tag Archives: tax

E-COMMERCE TAX IN CHINA
April-May China Bulletin

A tax on e-commerce business, first considered in 2003, was recently raised by Jindong Zhang, chairman of the electric chain store, Suning, and is under consideration by several departments in the PRC government under the lead of the Ministry of Commerce.  China’s online shopping industry has overtaken Japan’s and is expected to exceed the U.S.’s to become the largest online retail market this year. Continue reading

CHINA-NETHERLANDS – NEW TAX TREATY
April-May China Bulletin

The Netherlands is regarded as one of the preferred holding company jurisdictions for foreign investment into China and for Chinese investments moving abroad.  In the near future, a new tax convention signed with China on Mary 31, 2013, will provide additional benefits, including 5% withholding on dividends and 6% withholding on certain types of royalties that meet a “main purpose” test. Continue reading

OFFSHORE INDIRECT TRANSFERS & NOTICE 698
March China Bulletin

A U.S. investor with no residence in China that sells shares of a Cayman Islands company (which in turn holds shares in a Chinese subsidiary) may be subject to Chinese Enterprise Income Tax (EIT) of 10% on its gain.  Under Notice 698 (Guo Shui Han [ 2009] No. 698), the Cayman Islands company can be disregarded or looked through if its organizational form is considered abusive and without a reasonable commercial purpose.  If it is disregarded, EIT will be imposed on the U.S. seller as if the offshore transaction were a sale of the Chinese subsidiary’s shares. Continue reading

PILOT VAT PROGRAM CONTINUES
March China Bulletin

The pilot Value-Added Tax (VAT) program, first implemented in Shanghai (see Jan-Feb 2012 China Bulletin), is now a proven success.  It was extended to ten other cities and provinces in 2012 (see July 2012 China Bulletin) that together account for over half of China’s economic output and tax revenue.  General VAT tax-payers in the pilot areas have experienced a lower VAT burden on covered services.  Unlike the Business Tax, which formerly applied to such services, input VAT is not a sunk cost for such taxpayers because it can be offset against output VAT. Continue reading

BENEFICIAL OWNER STATUS UPDATE
March China Bulletin

The State Administration of Taxation (SAT) issued Notice 601 (Guo Shui Han [2009] No. 601) listing factors that the tax authorities should consider in determining whether an offshore party (not resident in China for tax purposes) receiving dividends, interest, royalties and other passive income from China qualifies as the beneficial owner of that income under China’s tax treaties.  In June, 2012, SAT issued Announcement 30 (Guo Shui Gonggao [2012] No. 30) directing local tax authorities 1) not to deny beneficial owner status on the basis of one unfavorable Notice 601 factor or grant such status because no intent to evade taxes is expressly set out in the taxpayer’s documentation, 2) Continue reading