Dear Sir or Madam,

Please find enclosed our update on the latest developments in Chinese Tax Law.

Kind regards,
CMS, China







What is new?




Business Tax/ VAT reform to be extended to all over China

It is reported by various newspapers that during the State Council Standing Committee Meeting of 10 April 2013, the State Council made a decision that the BT/VAT reform currently taking place in 9 pilot areas will be extended to cover all China starting from 1 August 2013. Further, it is intended that railway transportation, postal services and telecommunication services will also be shifted from BT to VAT.

For background information of the BT/VAT reform, please refer to our previous newsletter on this topic:

SAT Announcement [2013] No. 9 2013-02-19 2013-02-19 Calculation basis of corporate income tax payable by non-tax-resident enterprises where VAT is also payable

The SAT clarifies that in case both VAT and corporate income tax ("CIT") are payable by a non-tax-resident enterprise for taxable income sourced from China which is not connected to a permanent establishment (“PE”) in China, when calculating PRC CIT (in the form of withholding tax), the relevant revenue to be used shall exclude VAT.

It remains unclear whether the above principle shall also be used where CIT is payable for taxable income earned via a PE in China.

SAT Announcement [2013] No. 12 2013-03-13 2013-04-01 SAT provides further details on procedural issues regarding VAT and consumption tax declarations related to exportation of goods and services Back in 14 June 2012, the SAT issued the Administrative Measures on VAT and Consumption Tax related to Exportation of Goods and Service (“Measures”). The Measures are quite comprehensive and are viewed as framework regulation for VAT and consumption tax treatments for exportation of goods and services.

Based on the Measures, the Announcement provides further detailed guidance on various procedure and filing issues, e.g. application for VAT refund qualification, application for a change in the VAT refund calculation method, document requirements for tax declarations involving exportations, etc.

It is advisable that tax accountants who deal with the daily VAT / Consumption Tax declarations for exportation businesses study the Announcement carefully to comply with the relevant procedure and document requirements.
SAT Decree [2013] No. 30 2013-02-25 2013-04-01 Issuance of tax invoices via the on-line system The SAT issued this Decree to guide issuance of ordinary tax invoices (in Chinese “普通发票”, as compared to special VAT invoices, in Chinese “增值税专用发票”) via the on-line tax issuance system. Tax payers may apply with the tax authorities in order to be able to issue tax invoices via the on-line system.
SAT Decree [2013] No. 28 2013-02-25 2014-04-01 Administrative Measures on Tax Payment Documents The Decree provides detailed rules on the printing, usage and administration of tax payment documents which include tax payment receipts, tax refund receipts, tax payment certificates, etc.

Among other issues, the Decree mentioned that in case of taxes paid via a withholding agent, the tax payer (tax subject) is entitled to request a formal tax payment certificate.

For further information, please contact:

Charlie Sun
Head of Tax Practice Area Group

CMS, China
2801 Plaza 66, Tower 2
1266 Nanjing Road West
Shanghai 200040, PRC

T +86 21 6289 6363
F +86 21 6289 0731

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This information is provided for general information purposes only and does not constitute legal or professional advice. Copyright by CMS, China.

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